The Bank of America Corp. has agreed to pay $7.5 million for failing to properly monitor accounts of South American money transmitters who sent more than $3 billion through New York, some of which may have been used to finance Mideast terrorists, prosecutors said Wednesday.

Manhattan District Attorney Robert Morgenthau, who has made prosecution of illegal money movement a priority, said this case attracted him because so much of the money came from an area known to finance Hezbollah and Hamas terrorist cells _ the tri-border area where Argentina, Paraguay and Brazil meet.

He said he was unable to say for sure to whom the money went or how much went to fund terrorism.

Morgenthau said that since 1997, his money laundering investigations have uncovered nearly $19 billion moved illegally by Brazilian money transmitters through banks in Manhattan. As a result of these investigations and prosecutions, he said, his office has recovered $19.5 million for the city and state.

'It is troubling that, in our investigations alone, we have traced nearly $19 billion through banks in Manhattan and we have virtually no way of determining the source of most of this money or the identity of the recipients,' Morgenthau said.

From May 2002 to April 2004, Morgenthau said, more than $3 billion flowed through the remitters' account at the Bank of America. He said much of the money originated with offshore shell companies in Panama and the British Virgin Islands and was controlled by illegal Brazilian money service operations.

After a two-year investigation, conducted with the help of Brazilian authorities, Bank of America admitted that it failed to verify the information supplied to its Manhattan offices by some of its South American money services customers.

As part of the settlement, the bank agreed to cooperate with ongoing state and federal investigations and to abide by changes that banking regulators recommend regarding improvements in anti-money laundering programs.

The bank also will make a $6 million payment to the state and city and will pay $1.5 million to cover the costs of the investigation.

The bank said it 'cooperated fully' with prosecutors in the investigation and was 'pleased to resolve it.'

'Bank of America takes seriously its anti-money laundering obligations,' it said in a statement. 'Bank of America never knowingly does business with persons, organizations or businesses engaged in illegal activities and did not in this case.'

Morgenthau also announced that in another case 34 people and 16 British Virgin Islands companies were indicted for violating New York's banking law by conducting illegal money remittance operations in Manhattan. All the indicted defendants participated in illegal Brazilian money transmitting, he said.

Copyright 2006 The Associated Press. All rights reserved.