Key Ukip donor Arron Banks is being investigated over allegations that he breached finance rules during the Brexit referendum.
The Electoral Commission announced it had opened an inquiry into whether Nigel Farage’s close ally “committed offences, in relation to donations and/or loans made to campaigners”.
It said it would probe whether Better for the Country Limited – his campaign firm - “was the true source of donations made to referendum campaigners in its name, or if it was acting as an agent”.
Better for the Country donated around £2m to the Grassroots Out campaign group and is reported to be owed large sums by other organisations.
Mr Banks – who no longer donates to Ukip – also lent £6m to the Leave.EU campaign, fronted by Mr Farage, to avoid inheritance tax he later claimed.
That loan is due to be repaid at the end of this year, and is believed to be still outstanding.
The Commission said Better for the Country was “not registered as a permitted participant in the EU referendum”
Five registered campaigners reported donations from it during the referendum campaign period, totalling almost £2.4m.
Bob Posner, the Commission’s director of political finance and regulation, said: “Interest in the funding of the EU referendum campaigns remains widespread.
“Questions over the legitimacy of funding provided to campaigners at the referendum risks causing harm to voters’ confidence.
“It is therefore in the public interest that the Electoral Commission seeks to ascertain whether or not impermissible donations were given to referendum campaigners and if any other related offences have taken place.”
But Mr Banks immediately dismissed the potential consequences of the investigation, tweeting: “Gosh I'm terrified.”
In a statement, the Commission said it would investigate:
* Whether or not Better for the Country Limited was the true source of donations made to referendum campaigners in its name, or if it was acting as an agent.
* Whether the recipients of its donations were given the information required in respect of the donor.
* What steps the recipients took to verify the identity and permissibility of Better for the Country Limited as a donor.
* Whether or not Mr Banks was the true source of loans reported by a referendum campaigner in his name.
* Whether those individuals and entities involved in that arrangement acted in accordance with the law.
* Whether any individual facilitated a transaction with a non-qualifying person.
