G4S, the security company which has lurched from crisis to crisis over the past two years, is facing an investigation by international authorities into its alleged activities in Israel and the occupied Palestinian territories.

Sources said the Organisation for Economic Cooperation and Development’s (OECD) UK staff have indicated that it will be investigating the company’s work supplying Israeli security services.

It is alleged that G4S provides Israel with surveillance equipment at its checkpoints in the occupied territories, although the precise nature of the equipment is not known.

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The OECD, which operates under the umbrella of the Department of Business in the UK, is expected to investigate whether the supply of such kit is in contravention of its guidelines for multinational enterprises – a set of Government-backed recommendations for “responsible business conduct” overseas.

Given the illegality of the settlements under international law, the OECD is expected to question G4S on how it can justify, as a company from an OECD-member country, supplying or servicing kit that aids the occupation.

If the organisation finds G4S has acted improperly, it will create another major raft of bad publicity for the company which has already been pilloried for overcharging British taxpayers for its electronic tagging of prisoners and, perhaps most famously, its bungling of the Olympics security contract and its operation of prisons such as Oakwood, where there was a five-hour period of disorder at the weekend.

Only last month, the British Government warned UK citizens of the risks of doing business with Jewish settlements in the occupied territories. The UK Trade and Investment website was updated to warn the settlements are illegal and that operating there was risky.

The website warned against carrying out financial transactions, investments, purchases or procurements from businesses there, and tourism. It said EU citizens and businesses should “be aware of the potential reputational implications of getting involved in economic and financial activities in settlements, as well as possible rights abuses of individuals”, and added: “Those contemplating any economic or financial involvement in settlements should seek appropriate legal advice.”

That update marked a severe ratcheting up of the British criticism of Israel’s activities in the West Bank and East Jerusalem. In a move that enraged Israel, last July the European Union banned grants to Israeli companies or projects with links to the settlements.

The OECD’s national contact point in the UK declined to comment on the investigation, which is likely to take about three months for its first stage. Its decision to press ahead is seen as a victory for campaigners like Lawyers for Palestinian Human Rights and War on Want.

Under rules signed up to by the British Government last year, G4S and other companies will have to include a section on their protection of human rights.