Sleaze investigation over Muslim funds for Labour

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It followed allegations that a Muslim businessman used a "front" organisation for secret donations.

The Electoral Commission confirmed it is investigating a group called the Muslim Friends of Labour, which gave the party £100,000 a month between April and June.

It is the first such inquiry since Gordon Brown became Prime Minister in June.

Glasgow-based Imran Khand is alleged to have injected large sums into the organisation. But as his cash did not go direct to Labour, his identity remained secret.

Until recently the organisation donated only small amounts, but it is now the party's second biggest non-union donor.

The probe comes hot on the heels of the ending of the "cash for peerages" inquiry, which saw Tony Blair questioned three times over claims that major donors were promised knighthoods.

The Muslim Friends of Labour - registered to a PO box in South London - is an "unincorporated" association, which it means it does not have to identify people who give it money. But the commission is investigating its status amid allegations that it is actually a members' association, made up "wholly or mainly" of members of a political party.

If so, it would be breaking the law by failing to disclose the details of any donor of more than £5,000.

Labour MPs have repeatedly condemned Tories for accepting cash from the Midlands Industrial Council, another unincorporated association.

A Labour spokesman said: "MFL agreed to register with the Electoral Commission as a matter of best practice.

"It was able to assure the Labour Party that all donations received by it had come from permissible donors."

Mr Khand could not be contacted.