Donations made to the New Zealand First Foundation have been referred to the police to investigate - who then referred the matter to the Serious Fraud Office.
A police spokesperson said today they have already assessed the file "and will be referring the matter to the Serious Fraud Office".
The Electoral Commission received a complaint about the New Zealand First Foundation in November following reports alleging the Electoral Act may have been breached.
Today, the Electoral Commission said it made inquiries "into issues raised regarding the New Zealand First Party and the New Zealand First Foundation and their compliance with the requirements for donations and loans".
"Based on the information available, we have formed the view that the New Zealand First Foundation has received donations which should have been treated as party donations for the New Zealand First Party."
It said that in the commission's view, the donations were not "properly transmitted to the party and not disclosed as required by the Electoral Act 1993".
The Serious Fraud Office is looking into the NZ First Foundation, after a referral from police.
The Electoral Commission referred the matter to the police, saying it had the powers to investigate the knowledge and intent of those involved in fundraising, donating, and reporting donations.
Yesterday, NZ First leader Winston Peters released a statement in which he recommended to his party's president "that she begin preparing a complaint to the police over the massive breach of New Zealand First’s party information".
"Ongoing media stories using as their source stolen information are designed to skew an even political playing field. New Zealand First has so far been sensitive to the circumstances surrounding the theft of party information but can no longer tolerate the mendacious attacks against the party and its supporters," Mr Peters wrote.
The foundation was described by National MP Nick Smith under parliamentary privilege in November as being used "to conceal hundreds of thousands of dollars of donations".
Shortly after, the lawyer for Winston Peters, Brian Henry, sent an email to National Party leader Simon Bridges and Mr Smith threatening legal action of up to $30 million if statements made in Parliament were repeated outside the House.
The email invites the pair "to repeat what you said in the House in public or apologise".
It also denies allegations around the NZ First Foundation, calling it "not only false but malicious".
In November, Mr Peters told media that all declarable donations were declared to the Electoral Commission, and said he looked forward to discussing the matter with the commission.
The foundation trustees are Mr Henry and former NZ First MP Doug Woolerton.
In a statement released this afternoon, Mr Peters said he welcomed the initial referral to police, saying it "confirms our prior view that only the police would have the powers to determine the issues involved".
"In light of the Electoral Commission’s findings today the New Zealand First Party can also confirm it will be reviewing its arrangements for party donations."
He said NZ First's "arrangements for collecting donations has been the same as other political parties".
Mr Peters said the Electoral Commission's statement "further underscores the importance of reviewing the donations regime" and that he had already advised NZ First "to take this course of action and itself refer the matter to the police, which the party had agreed to do".
"This does not imply any impropriety but is intended to ensure the party, as with all parties, have robust arrangements.
"I am advised that in all its dealings the foundation sought outside legal advice and does not believe it has breached the Electoral Act," Mr Peters said.
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