Wachovia Bank is in talks with the U.S. Justice Department to settle complaints relating to the alleged failure in bank controls that enabled Mexican exchange houses to launder drug money, the Wall Street Journal said, citing people familiar with the situation.

A settlement could come within weeks, the people told the paper. And it is not clear whether cash payment will be part of the settlement, the Journal said.

The U.S. attorney's office in Miami began the probe about three years ago, the paper said.

The probe focused on the alleged role a Wachovia unit played in processing illegal money transfers for the exchange houses, the paper said citing court documents and people familiar with the matter.

The exchange houses dot the U.S.-Mexican border and serve as a hub in the global remittance business that allow U.S. immigrants to send money back to Latin America to help relatives, according to the paper.

However, Federal officials also have identified the money transfer business as a way for drug traffickers to move cash around, the Journal said.

In an annual filing with the U.S. Securities and Exchange commission on February 26, Wells Fargo, which owns Wachovia, said it is engaged in discussions to resolve this matter by paying penalties and entering into agreements concerning future conduct.

Wachovia officials have been cooperating with the probe and has not admitted any liability, the paper said.

We look forward to resolving this issue, and are committed to maintaining compliant and effective anti-money laundering policies and practices, and a strong compliance and risk management culture across the integrated organization, the paper quoted Wells Fargo's statement released on Sunday.

Wells Fargo could not be immediately reached for comment by Reuters outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Derek Caney)