Zafar Iqbal-Din, who represents Park Ward, for Labour, was interviewed by West Yorkshire Police and bailed until May to allow investigators time to make more inquiries.

The councillor, of St Augustine's Terrace, Halifax, said he had had been arrested and bailed as part of an investigation into a friend's activities.

He said he was one of around 15 aquaintances who loaned the man money towards a substantial deposit towards a property purchase.

He stressed the investigation was unconnected with his council activities and said police became involved due to concerns about his friend's activities.

He said all those who had provided the man with money had been seen by police.
"This guy bought a property and put up a large deposit. he took money from different people who said they would give him a few thousand pounds.
"The police questioned every one of them."

West Yorkshire Police said officers arrested a 45-year-old man from Halifax on February 18 on suspicion of money laundering offences.
"He is currently on bail pending further inquiries," said a force spokesman.

A spokeswoman for Calderdale Council said as it was a police investigation they would not be commenting.

Mr Iqbal-Din is due for re-election in 2010.
A Yorkshire and Humberside Labour Party spokesman said: "We would not comment on any on going police investigation, however, when allegations are made against a Labour Party member we take them very seriously and if found to be correct disciplinary action will follow."