Prosecutors argued that the bank had failed to properly monitor the activities of certain South American business customers who were using an account held at one of its Manhattan offices to conduct illegal money transfers.
The two-year money laundering probe conducted by Manhattan's district attorney Robert Morgenthau found that some $3 billion had flowed through the account of a Uruguayan money remitter between May 2002 and April 2004, with most of the cash coming from the tri-border area between Argentina, Paraguay and Brazil, where some financing for the Middle Eastern terrorist groups Hizbullah and Hamas is known to originate from.
Under the settlement, the Bank of America has agreed to pay $6 million to the state and city of New York and a further $1.5 million to cover the costs of the investigation.
The bank, which admitted that it had failed to verify information supplied to its Manhattan offices by some of its South American money service customers, has also agreed to revise its anti-money laundering procedures and to cooperate with ongoing state and federal investigations into the crime.
Following the outcome of the investigation, the Bank of America emphasised that it "takes seriously" its anti-money laundering obligations.
"Bank of America never knowingly does business with persons, organizations or businesses engaged in illegal activities and did not in this case," the bank said in a statement.