Khalid Mahmood, who represents Birmingham Perry Barr, this weekend admitted supplying Mozam Aziz – who holds a criminal record – with a reference on House of Commons headed paper.

“I had no idea what they were doing,” said the MP to the Sunday Mercury.

“It was an error of judgement. But I was misled.”

Sources close to the joint police and fraudbusters probe have said that the MP was not implicated in the fraudulent activity itself.

However, the character reference which Mr Mahmood supplied, addressed to French Bank Societe General, was used to swindle a huge amount of money by the gang and consequently his actions are likely to attract the interest of the House of Commons’ standards watchdog.

Mr Mahmood added: “I had no idea they were fraudsters or that they would use the reference as part of a mortgage fraud. I was relatively new to being an MP when I wrote it.

“I took these people on face value. I thought they were up and coming businessmen. I will be much more careful in future.”

It would be wrong to assume that the funds given to the fraudsters in this instance would have been obtained purely using the MP’s reference. Whilst they may have played a part in portraying the fraudster’s character in a more positive light, the bank’s decision would have been based on the fraudsters’ inflated valuation of the property involved.

Mr Mahmood supplied the reference to 39-year-old Mozam Aziz in 2005. Southwark Crown Court heard how Mr Aziz had been the sole director of Highstar Properties Ltd and Goldgrade Properties Ltd at the time.

It became apparent though that Mr Aziz had just been a figurehead for the companies and that they were in fact ‘shell companies’ used by his fraudster brothers Saghir and Nisar Afzal, from Edgbaston.