The largest bank in the United States, Bank of America, has agreed to pay nearly $140 million to settle a fraud case with the US Department of Justice.

Bank of America admitted its employees had rigged bids in their marketing of financial contracts linked to municipal bonds.

The settlement follows a four-year investigation by US authorities into anti-competitive practices in the sale of investment agreements linked to the bonds.

Municipal bonds are sold by government departments, local councils and non-profit groups in the US to raise money for their services, such as schools and roads.

The US Department of Justice says Bank of America employees were involved in illegal conduct, including a conspiracy to rig bids on investments linked to the bonds.

So far eight executives from financial institutions, including Bank of America, have pleaded guilty to criminal charges brought by the department.

It says the bank was the only financial institution to voluntarily come forward before the investigation started.

The company was granted amnesty from prosecution in return for its cooperation in the investigation.

The assistant attorney-general in charge of the department's antitrust division, Christine Varney, says the investigation into fraud in the mortgage bond industry is continuing.

"Bank of America's disclosure of wrongdoing and cooperation has led to an aggressive ongoing investigation by the department into anti-competitive activity in the municipal bond derivatives industry," she said in a statement.

"The prosecution of anti-competitive conduct in the financial markets remains our highest priority."

The bank said it was pleased to put the issue behind it.

"Bank of America continues to cooperate with all agencies on their inquiries," it said in a statement.

Earlier this year, US investment bank Goldman Sachs agreed to pay $550 million to settle fraud charges brought by the US corporate regulator in relation to a subprime mortgage-linked investment.

Professor of finance at the University of New South Wales, Fariborz Moshirian, says settlement by financial companies in US fraud cases is now routine.

He says court action had not deterred offenders in the past.

"The Bank of America accepted they have done something illegal and also it is significant because the Bank of America is trying to settle all other challenges they are facing with the Department of Justice," he said.

Professor Moshirian says the department's Antitrust Corporate Leniency Program has encouraged companies to provide information to the Department of Justice.

"It could assist the justice department to identify other major banks which were engaged in similar fraud activities," he said.