May 2 (Reuters) - A U.S. Department of Justice (DoJ) investigation into TD Bank is focused on how Chinese drug traffickers and crime groups used the Canada's second-largest lender to launder their money from fentanyl sales, the Wall Street Journal reported on Thursday.

The bank disclosed last year that it was cooperating with authorities in an investigation into its anti-money laundering compliance program by the DoJ.

The investigation was initiated after agents uncovered an operation in New York and New Jersey that laundered hundreds of millions of dollars in proceeds from illicit narcotics through TD and other banks, the WSJ reported, citing court documents and people familiar with the matter.

TD Bank and the DoJ did not immediately respond to Reuters' requests for comment.

Earlier on Thursday, Canada's anti-money laundering agency imposed its biggest-ever penalty of nearly C$9.2 million ($6.71 million) on TD Bank over non-compliance of anti-money laundering regulations.

(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Anil D'Silva)