A MAN has been arrested on suspicion of money laundering in connection with City Hall fraud allegations.

His home in Leytonstone was searched yesterday by officers investigating funding by the London Development Agency, Ken Livingstone's business arm, to six community organisations.

The man volantarily attended Belgravia police station where he was arrested.

Earlier yesterday three other addresses in Harrow, Tottenham and Croydon were also searched.

Another man, 61, who is not believed to be from Waltham Forest, was also arrested.

Both have been bailed to return to police stations tomorrow.

The investigation has caused a headache for London Mayor Ken Livingstone since the police were alerted to the allegations last year.

When asked about the funding of one of the six organisations, youth group Brixton Base, Mr Livingstone said he had "a complete audit trail."

But last Month he told the London Assembly he had "no specific briefing about any one grant."

The investigation has already claimed one casualty.

Mr Livingstone's race advisor Lee Jasper resigned last week claiming he was the victim of a "racist" and "relentless media campaign".

Mr Jasper was suspended from his £120,000 post and was due to appear before the London Assembly to answer questions about the claims.

An internal review by the LDA published in January said there was no evidence against Mr Jasper to support charges of "corruption and collusion" in the awarding of the grants.

A spokesman for Ken Livingstone said: "The GLA will naturally not comment on any individual arrest or an ongoing police investigation which has not been tried before a court.

"However, in the event that any money is proven to have been illegally taken from any project associated with the GLA or LDA, the Mayor will naturally always press for the strongest possible action to be taken."