The investigation is believed to centre on two 1MDB bond issues in May and October 2012 in which the government-owned investment fund raised a total of US3.5 billion.

The bond issue was handled by merchant bankers Goldman Sachs. A senior executive recently resigned after investigations began into the hefty fees earned by the company for the deal.

The Luxembourg bank is a private banking unit of the Edmond de Rothschild Group which manages money on behalf of wealthy clients. “Edmond de Rothschild Europe is actively cooperating in the judicial proceedings,” a spokeswoman for the bank told the Wall Street Journal, while the Luxembourg justice department declined to comment on the identity of the bank in question.

The Luxembourg investigation is connected to a Swiss investigation into a possible embezzlement of up to US$4 billion in transactions related to 1MDB.

The Luxembourg prosecutor said in a statement on Thursday that its inquiry was focused on the movement of funds through a number of accounts of offshore companies in Singapore, Switzerland and Luxembourg.

1MDB has said it has not been contacted by any of the authorities in Switzerland, Luxembourg, New York or Singapore where various related investigations are taking place.

The US Justice Department has asked Deutsche Bank AG and J P Morgan Chase & Co for documents related to their interactions with 1MDB, the Wall Street Journal reported.

Officials from the department travelled to Kuala Lumpur recently to interview the banks.

Deutsche Bank was involved in sending USD1 billion out of the country in 2009 for a joint venture between 1MDB and a Saudi oil company. The Wall Street Journal, quoting leaked documents, has previously reported that USD700 million ended up being transferred to another company.