(CNNMoney.com) -- Wachovia Corp. is being investigated by Federal prosecutors as part of a probe into alleged drug money laundering by Mexican and Colombian money-transfer companies, according to a Wall Street Journal report Saturday morning.

A Wachovia (WB, Fortune 500) official said the bank is cooperating in the probe, which is also scrutinizing several other large U.S. banks, according to the newspaper. The bank severed its ties to these money transfer firms in December and January, when the investigation began.

The U.S. banking industry has pursued a foothold in the remittance industry, which transmits more than $50 billion from the U.S. to Latin America annually - primarily on behalf of immigrants sending money back to their families. The industry charges high fees to transfer these funds.

But, the Journal said, remittance outfits can also be used by narcotics traffickers seeking to move the proceeds of drug sales between the U.S. and Latin America.

Tough times

The probe comes at a difficult time for the bank, which announced on Friday that it will pay $144 million to settle federal charges that it failed to stop telemarketers from taking advantage of thousands of elderly consumers.

On April 14, the North Carolina-based bank posted a $350 million loss in the first quarter -its first quarterly loss since 2001. Wachovia took a $2 billion charge for "market-disruption" losses in the quarter, and also signaled difficulties with Golden West Financial, which Wachovia acquired in 2006 for $24.6 billion.

Golden West was a leading issuer of so-called option adjusted rate mortgages (ARMs) - loans that give borrowers the right to pay less than the full bill. Wachovia boosted its reserve for possible loan losses on Golden West's portfolio, valued at roughly $120 billion, to $1.1 billion, as late payments nearly doubled to 3.1% of the loans.

In the wake of these problems, the bank cut its dividend and said it plans to raise $7 billion in capital.