RBS, HSBC and Barclays are being sued by the families of US soldiers killed in combat in Iraq for allegedly processing Iranian money that paid for shootings and roadside bombs.
The banking giants face the litigation at the US District Court in New York. Two other banks, Credit Suisse and Standard Chartered, are also being sued.
Lawyers are bringing the action under US anti-terrorism laws on behalf or 200 people related to service personnel who were killed or injured in Iraq.
It claims the banks conspired with Iranian banks to mask wire transactions in order to evade sanctions. The Iranian banks then funnelled more than $100 million (£63m) to militant groups that operated in Iraq at Iran's direction, according to the suit.
They included a Shi'ite militia in Iraq, Kataib Hezbollah, as well as Quds Force, the overseas arm of Iran's Islamic Revolutionary Guard Corps, it is claimed.
Since 2009, the five banks have agreed to pay about $3.2 billion (£2bn) to the US to resolve allegations that they handled money in violation of sanctions against certain nations. They signed deferred-prosecution agreements with the US Justice Department in addition to settlements with US banking regulators.
Although it has made no comment on the current litigation, HSBC has previously accepted responsibility for its "past mistakes."
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