Nearly 200 federal agents, accompanied by local police and armed with search warrants, began removing records from seven Puerto Rico-based financial institutions yesterday as Attorney General Edwin Meese III announced that 17 persons, most of them officials of the institutions, have been charged in a major federal money-laundering probe called Operation Tracer.

U.S. Attorney Daniel F. Lopez-Romo said in a telephone interview from San Juan that he believes the 18-month undercover operation will result in additional arrests for money laundering, narcotics trafficking and other activities.

"It's the start of a big operation," he said. "I think this is the largest money-laundering case ever in the whole nation."

Federal law enforcement sources said they did not yet know how much money is involved.

The case involves current and former officers at eight branches of six Puerto Rico banks and savings and loans, and two Puerto Rico branches of New York-based Citibank.

Lopez-Romo said the 17 defendants had been arrested and that 10 search warrants had been served on nine financial institutions and one residence.

The operation was handled by federal agents from the Internal Revenue Service, the Drug Enforcement Administration and the U.S. Customs Service. Meese said it was the first of an expected series of cases related to money-laundering operations in Puerto Rico.

Informed U.S. sources said that undercover agents were assisted by bank executives in devising ways to launder money. In addition, they said, bank officials accepted bribes in return for ignoring a federal requirement that they report to the Treasury Department any cash transaction of $10,000 or more.

The Bank of Boston was linked to the largest money-laundering case in U.S. history earlier this year when it pleaded guilty to criminal violations of the Bank Secrecy Act for failing to report $1.22 billion in foreign currency transactions. The bank paid a fine of $500,000; there have been no indictments of bank officials in that case.

James I.K. Knapp, deputy assistant attorney general in the Criminal Division, said that the charges in Puerto Rico are even more important than those in the Boston case.

"There were a bunch of different institutions involved in a bunch of different transactions," Knapp said of the Puerto Rico investigation. He added that while Bank of Boston officials blamed their problems on a lack of awareness of the law, "here, at least in some instances, the evidence will show that the action was deliberate."

Sources said the charges are based on laundering of relatively small amounts of money by the undercover agents. But they said they expect the seized banking records to show a pattern of money laundering for narcotics traffickers and organized-crime figures that is likely to lead to more arrests.

Sen. William V. Roth Jr. (R-Del.), chairman of the Senate permanent subcommittee on investigations, said yesterday that he had ordered his staff investigators to go to Puerto Rico to "try to determine how so many financial institutions could be so blatantly involved in money laundering."

"The level and degree of corruption represented by the search and arrest warrants . . . is unbelievable," Roth said. "Puerto Rico appears to be virtually awash in dirty money. The problems uncovered . . . at the Bank of Boston pale in comparison to what apparently has been going on in Puerto Rico."

Meese said the investigation -- part of Operation Greenback-Puerto Rico -- is being run by the Florida-Caribbean Organized Crime Drug Enforcement Task Force, which went into effect Oct. 1.

Those indicted include:

* The president, the vice president and a branch manager of the Caribbean Federal Savings Bank.

* A former and a current branch manager of two Puerto Rico offices of New York-based Citibank.

* A former and a current branch manager of the Western Federal Savings Bank.

* Two branch managers of the Bayamon Federal Savings and Loan Association of Puerto Rico.

* The vice president and another officer of the Banco Financiero de Puerto Rico.

* A former vice president of the First Federal Savings Bank.

* A former branch manager of the Banco de Ponce.

The defendants charged with the most serious offenses face up to 45 years in prison and fines of up $2.5 million.