French prosecutors are investigating if Malaysian Prime Minister Najib Razak had received bribe in a $1.2bn arms deal when he was defence minister.
The investigators are probing if Najib had received illegal kickbacks from French group Thales International Asia, through an associate, the Financial Times reported.
The embattled prime minister had denied any wrongdoing in the case involving the contract to buy two Scorpene-class attack submarines from the French company. Bernard Baiocco, former president of French defence group Thales International, has also denied wrongdoing.
Najib is facing a political storm over the financial irregularities in the Malaysian state fund 1Malaysia Development Berhad (1MDB). Authorities in Switzerland and Singapore are probing the misappropriation of funds from 1MDB.
Paris prosecutors said Baiocco is being formally investigated on suspicion of "bribery of foreign public officials". French investigators did not reveal the names of the Malaysian officials allegedly involved in the bribery, but sources told FT Najib and Abdul Razak Baginda were named in the document.
Baginda told FT he had received €30m to lobby for the project but denied he took any bribe. "It was a legitimate agreement. I did my job and I got paid for it... And I never paid any official."
Baginda had been acquitted in the 2006 murder of Mongolian citizen Altantuya Shaariibuu. The French investigators believe there could be a connection between Altantuya's murder and the bribery.
The Malaysian government dismissed the allegation of bribery as "baseless and for political gain."