In these times of financial crisis when the mega-rich are somehow getting ever richer, it's hard to choose one single symbol of mind-blowing, cash-scorching wealth and ostentation. There are plenty of possibilities in Paris, but none quite as disconcerting as 42 Avenue Foch.

Walk up the Champs Elysées past the Louis Vuitton superstore, turn left at the Arc de Triomphe, and continue along the tree-lined avenue, past the multimillion-euro penthouses, towards the Gestapo's old Paris headquarters. At number 42, you'll find a six-storey, 101-room mansion, worth around €150m. The Venetian blinds are gathering dust, but don't let that fool you. The residence boasts its own hairdresser, cinema, gym and nightclub. Decorated with more than €40m-worth of furniture, every item is a collection piece including a €3m clock, €1.6m Louis XV desk, a Rodin sculpture and a dozen Fabergé eggs. A source in a neighbouring building told me that in December last year, a truck from Belgium was seen delivering more than 50 Christmas trees and an estimated €30,000–€40,000-worth of baubles. A team of five people were believed to have taken a week to dress the staircase and mansion but despite the festive decor, no one turned up for Christmas.

Until recently, a fleet of luxury sports cars in filled the garages in the cobbled courtyard. Their owner was so concerned about security that neighbours said if he fancied a 2am jaunt, he would order his chauffeur to "warm up" four or five of the Porsches, Ferraris and Maseratis – with thundering acoustics from the revving engines – then decide to travel in another, perhaps one of his two Bugatti Veyrons, the most expensive and fastest street car in the world, costing about €1m apiece and reaching 250mph. But last week's announcement of the seizure of the mansion by French investigators is a major new move in what is arguably the most important investigation into alleged African state embezzlement that Europe has seen. Hopefully it will push other authorities, not least in London, to take a closer look at where the money comes from to feather foreign politicians' luxury bolt holes.

The family of the authoritarian Equatorial Guinea leader Teodoro Nguema Obiang – particularly his 41-year-old "playboy" son, Teodorin, alleged to have used 42 Avenue Foch as his Paris pied-à-terre – is at the centre of an inquiry into allegations that three serving African leaders and their families embezzled state funds to acquire vast assets in France including Riviera villas and fleets of luxury cars. Obiang, also under investigation in the US, is currently second vice-president of the oil-rich west African country, which has been ruled with an iron fist by his father since a 1979 coup. He is the subject of a French arrest warrant, wanted for questioning by Paris's financial fraud squad over allegations of embezzling state funds, money laundering and breach of trust. More than 11 of his sports cars worth around €5m were seized in Paris earlier this year and investigators needed several lorries to clear assets from the mansion, including bottles of wine worth thousands of euros each. "I've never seen anything like it, such an accumulation of luxury," one Paris police officer said. The dressing room was full of designer clothes, many with their labels still on in 2000, when Obiang began building up his car collection, Equatorial Guinea was on paper the wealthiest African country per inhabitant, yet a majority of its people lived below the UN poverty line.

Obiang and the other clans under investigation – the family of Gabon's late leader Omar Bongo and its current leader, his son Ali Bongo; the Congo-Brazzaville leader, Denis Sassou-Nguesso – deny building up personal wealth through siphoning public funds in oil-rich states. Obiang's lawyers say the Avenue Foch mansion belongs to the "state of Equatorial Guinea not to the presidency".

Whatever has been claimed about the leaders' lifestyles – from Obiang's penchant for Michael Jackson memorabilia, to Sassou-Nguesso spending €24,000 on 48 shirts in one month, which his lawyer denies – it's clear that diplomatic relations should never be allowed to return to the old ways of the west "turning a blind eye" to cash pouring in from abroad. Known in Paris as the case of the "ill-gotten gains", this is the first time serving leaders have been targeted in an investigation sparked by an anti-corruption association, even if it did take years of legal battle by NGOs Sherpa and Transparency International. Crucially, those being investigated are still in office. While the world turns its mind to picking through the assets of ousted kleptocrats like Egypt's Mubarak or Tunisia's Ben Ali, or doing a financial post-mortem on the far-flung riches of dictators like Gaddafi or Saddam Hussein, anti-corruption campaigners are pressing governments to crack down on money-laundering while leaders are still in the chair.

If Paris and the French Riviera have always been chic addresses for autocrats' bolt holes, London with its financial centre is a world favourite for kleptocrats. The Arab spring has shown patience is running out. Earlier this year James Ibori, former governor of Delta state in Nigeria, whose properties included a flat in St John's Wood and houses in Hampstead and Dorset, was sentenced to 13 years in prison in the UK after admitting fraud of nearly £50m. The Metropolitan police estimated he embezzled $250m (£157m) of Nigerian public funds.

Now more than ever London is under pressure to show that its banks, multinationals and tree-lined avenues won't be a safe haven for money-laundered cash plundered from other states.