German prosecutors raided the finance and justice ministries on Thursday as part of an investigation into possible obstruction of justice by the government's anti-money laundering agency.
The probe into the Financial Intelligence Unit, an agency of the finance ministry under SPD chancellor candidate Olaf Scholz, is looking at whether the division failed to act on warnings from banks of possible money laundering.
The raids come at a pivotal moment for Scholz, who opinion polls suggest has a good chance of becoming German chancellor in national elections on Sept 26.
The FIU along with the Germany's financial regulator, Bafin, both units of the finance ministry, have previously been criticised for failing to detect problems at payments company Wirecard, which collapsed in the country's biggest post-war fraud scandal.
A spokesman for the public prosecutors said they launched the inquiry after receiving complaints that the FIU had not acted on millions of euros of suspect transactions, including to Africa, between 2018 and 2020.
He said they had searched the ministries to see whether the agency had been told to ignore the suspect money flows.
Prosecutors said the agency was alerted by banks because of concerns the money was linked to trafficking of arms and drugs and terrorism financing, saying that the FIU took note of the report but did not forward it to law enforcement agencies.
Prosecutors said they were also looking into the fact that since the FIU took over control of money laundering in 2017, reports of suspicious activity have dropped drastically.
They said that previous searches of the FIU had revealed that there had been extensive communication with the ministries that were searched on Thursday.
The finance ministry said in a statement that it supported the investigation and noted that suspicion was not directed at the ministry's employees.
($1 = 0.8453 euros)