US federal prosecutors have launched a criminal corruption probe into one of Afghan President Hamid Karzai's brothers, The Wall Street Journal reported Monday.

Mahmood Karzai, a US citizen subject to US tax law, is at the center of an investigation led by federal prosecutors in the Southern District of New York, the newspaper said, citing US officials.

The move could risk a further setback in already toxic ties with the mercurial leader, who has challenged US efforts to overcome graft in Afghanistan that they say is undermining public support for the Afghan president and thus helping fuel the Taliban insurgency.

Senior officials in President Barack Obama's administration are already said to have decided to pull back on Afghan anti-corruption efforts, to smooth relations with Karzai.

Prosecutors are trying to establish whether they have enough evidence to bring tax evasion, racketeering or extortion charges against Mahmood Karzai, the Journal said. It noted that prosecutors are also looking at Afghan bank executives and alleged opium traffickers.

But officials said prosecutors were unlikely to make a move until early next year, after Obama's administration completes a review of its Afghan strategy.

Speaking to the newspaper, the president's eldest brother denied any wrongdoing, saying his wealth and business interests were legitimate.

"How many people do you think they have on me? Four, five, 10, 20?" he said. "They won't find anything. I'm just a businessman."

Mahmood Karzai, who has indicated he may run for president himself in 2014 and who owns four properties in the United States, also claimed his sole interest was in "rebuilding Afghanistan."

He provided the Journal with financial documents showing he has amassed a net worth of about 12 million dollars, including a 20 percent ownership in a huge US-style housing development in the desert outside Kandahar in southern Afghanistan.

Before the US-led invasion of his country in 2001, his main business was a restaurant in Cambridge, Massachusetts, the newspaper said.

It said that prosecutors may focus on transactions such as US government loans, which Mahmood Karzai has sometimes used to build his businesses. Mahmood Karzai said late Republican congressman Jack Kemp helped him secure 5.5 million dollars in US government loans to finance housing developments.