AMSTERDAM, Jan 20 (Reuters) - Prosecutors are close to a settlement with Dutch bank ABN Amro over allegations it failed to report or probe suspicious transactions by its clients for years, the FD newspaper said on Wednesday, citing sources close to the talks.

ABN and prosecutors could not immediately be reached to comment on the report. ABN, which has been under investigation since September 2019, previously said it was cooperating but would not comment during the investigation.

ABN has not taken a provision for a settlement, but analysts expect the investigation to lead to a settlement with a fine of hundreds of millions of euros.

Larger rival ING was hit with a $900 million fine for similar charges in 2018. Prosecutors are still weighing whether to bring charges against former ING Chief Executive Ralph Hamers, who now leads UBS, over the 2018 case.

Wednesday's FD report said prosecutors were considering whether to expand the ABN probe to include any former ABN managers, such as Gerrit Zalm, who is the bank's former CEO and a former finance minister of the Netherlands,

After ING's fine, ABN said it had spent around 400 million euros ($486 million) to improve its capability to detect financial crimes.

The bank in August said it had dedicated more than 3,000 employees to anti-money laundering activities, taking its total staff up to more than 19,000. In November, it launched a cost-cutting drive as it pulled back from international markets.

ABN shares closed at 8.53 euros on Tuesday, having recovered only slightly from a drop from above 16 euros shortly before the coronavirus pandemic crisis began in late February 2020.

($1 = 0.8228 euros)

(Reporting by Toby Sterling; Editing by Edmund Blair)