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British defence company BAE Systems has revealed that it is to be subject to an anti-corruption probe by US officials.

In a statement this morning Europe's largest military contractor confirmed that the US department of justice had notified the company that the investigation would include an examination of its business with Saudi Arabia.

"BAE Systems has been notified by the US department of justice that it has commenced a formal investigation relating to the company's compliance with anti-corruption laws including the company's business concerning the kingdom of Saudi Arabia," said the firm.

A spokesman for BAE said that the company had nothing to add further to the announcement of the probe, which follows previous allegations that the firm established a slush fund to help secure a defence contract with Saudi Arabia in the 1980s.

Last year a Serious Fraud Office (SFO) investigation into the al-Yamamah deal was dropped after prime minister Tony Blair said that the probe would undermine national security and harm Britain's relations with the Middle East country.

BAE came under further scrutiny earlier this month after the BBC and Guardian newspaper reported that the company had made payments totalling around £1 billion to a leading member of the Saudi royal family in connection with the contract.

According to the claims, the payments to the former Saudi ambassador to the US, Prince Bandar, were made over a decade-long period and discovered during the SFO's investigations.

Analysts say that the launch of the US probe into BAE's activities in Saudi Arabia may undermine its efforts to expand in North America, where the company is in the process of buying armoured vehicle manufacturer Armor Holdings.

In an apparent move to provide reassurance about its operations, BAE recently asked the former lord chief justice Lord Woolf to conduct an independent review of its business practices.

Ministers may also be left red-faced as a result of the US probe, say commentators. They point out that the al-Yamamah deal was essentially an agreement reached between the Saudi government and a previous British administration, with BAE as the main contractor.

As such the Ministry of Defence will be responsible for determining whether details are revealed about the agreement if it is part of the US investigation, analysts say.