Banking giant Wachovia Corp. has agreed to pay $160 million to settle a federal investigation into laundering of drug money through Mexican exchange houses.

The agreement unveiled Wednesday in Miami calls for Wachovia to also institute better money-laundering controls. In return, the bank and its executives will avoid any criminal prosecution.

The Mexican exchanges are used by immigrants to send money home. Prosecutors say they are also used by drug traffickers to transfer illicit cash.

Wachovia is a unit of San Francisco-based Wells Fargo & Co. The parent company's officials say they knew about the investigation before buying Wachovia in 2008 and set aside reserves that will pay for the settlement.