The Department for International Development has been strongly criticised by MPs for channelling hundreds of millions of pounds of taxpayers' money into an overseas investment agency despite fears that the funds were going to projects linked to known fraudsters.

The UK is the biggest donor to the Private Infrastructure Development Group (PIDG) - which was set up to invest in infrastructure projects in developing countries - with total support expected to reach £860 million by 2017.

However the Commons Public Accounts Committee said that PIDG, was beset by "poor financial management", lavish travel spending, and doubts about the integrity of its investments.

In its report, the committee raised concerns that funds had gone to companies with links to "known criminal fraudsters" and the "looting" of Nigerian oil revenues.

The department,which is headquartered in East Kilbride , insisted the alleged links with a criminally fraudster had been thoroughly investigated and that "absolutely no evidence" had been found to support them.

A Dfid spokesman said: "Britain's investment in PIDG has helped to create 200,000 jobs and driven £6.8 billion of private investment into some of the world's poorest countries, developing their economies and making them less dependent on aid.

"We already have strong oversight of PIDG's activities and have recently clamped down on excessive travel rates. An independent review of their operations, backed by Britain, will ensure they continue to kick start growth in the developing world."