A US government panel has rejected Ant Financial's acquisition of US money transfer company MoneyGram International over national security concerns, the companies has said, the most high-profile Chinese deal to be torpedoed under the administration of US President Donald Trump.

The $1.2 billion deal's collapse represents a blow for Jack Ma, the executive chairman of Chinese internet conglomerate Alibaba Group, who owns Ant Financial together with Alibaba executives.

He was looking to expand Ant Financial's footprint amid fierce domestic competition from Chinese rival Tencent's WeChat payment platform.

Ma, a Chinese citizen who appears frequently with leaders from the highest echelons of the Communist Party, had promised Trump in a meeting a year ago that he would create one million US jobs.

MoneyGram shares were down 8.5% at $12.06 in after-market trading.

The companies decided to terminate their deal after the Committee on Foreign Investment in the United States (CFIUS) rejected their proposals to mitigate concerns over the safety of data that can be used to identify US citizens, according to sources familiar with the confidential discussions.

"Despite our best efforts to work cooperatively with the US government, it has now become clear that CFIUS will not approve this merger," MoneyGram Chief Executive Alex Holmes said in a statement.

A standard CFIUS review lasts up to 75 days, and the companies had gone through the process three times in order to address concerns.

Additional security measures and protocols that the companies suggested failed to reassure CFIUS, the sources said.

The US Treasury said it is prohibited by statute from disclosing information filed with CFIUS and declined to comment on the MoneyGram deal.

The US government has toughened its stance on the sale of companies to Chinese entities, at a time when Trump is trying to put pressure on China to help tackle North Korea's nuclear ambitions and be more accommodative on trade and foreign exchange issues.

The MoneyGram deal is the latest in a string of Chinese acquisitions of US companies that have failed to clear CFIUS.

They include China-backed buyout fund Canyon Bridge Capital Partners LLC's $1.3 billion acquisition of US chip maker Lattice Semiconductor and Chinese buyout firm Orient Hontai Capital's $1.4 billion acquisition of US mobile marketing firm AppLovin.

In November, China Oceanwide Holdings and Genworth Financial extended a deadline to 1 April for the Chinese group's planned $2.7 billion takeover of the US life insurer.