The EU parliament’s disciplinary body has recommended that Nigel Farage faces the “highest penalty” for a “serious breach” of its code of conduct, a leaked letter suggests.

The recommendation from the European parliament’s Advisory Committee on the Conduct of Members, revealed by Channel 4 News, also suggests referring the Brexit Party leader to the European Anti-Fraud Office (Olaf) for further investigation over claims about the sources of funding for his lifestyle.

In the letter, send to the parliament’s president Antonio Tajani, the disciplinary committee says the parliament’s authorities should “liaise and cooperate with the UK national investigatory authorities, including the National Crime Agency, the Electoral Commission and the Metropolitan Police, in order for the full facts to be established”.

The Independent revealed in May that Mr Farage was to be put under investigation by the parliament over claims he failed to declare £450,000 in gifts from Arron Banks, who himself is under investigation by the National Crime Agency.

None of the gifts, detailed in invoices seen by the broadcaster, were declared on Mr Farage’s register of interests with the European parliament.

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The gifts are said to have included access to a chauffeur-driven car, rent and bills on a £4.4m home in Chelsea and trips to the United States to meet with right-wing politicians.

Mr Tajani, the president of the European parliament, has the power to reprimand and temporarily suspend MEPs from parliament for up to 30 days, during which they can no longer collect their daily allowance.

The letter also reportedly recommends Mr Tajani refer Mr Farage’s conduct to the European Anti-Fraud Office for investigation, and suggests it cooperate with the National Crime Agency, the Electoral Commission and the Metropolitan Police.

It concludes: “The Advisory Committee strongly believes that the circumstances of this case merit extensive further investigation with continuous EU-level supervision and cross-Member State collaboration, including third countries when necessary.”

The Brexit Party leader initially told Channel 4 News “no comment” on their investigation, but later told the BBC: “Whatever happened after the referendum – I was leaving politics, it happened mostly in America, it had nothing to do with politics, nothing to do with the Brexit Party, it was purely on a personal basis. I was looking for a new career and a new life – it’s got nothing to do with anything, it’s a purely private matter.

However, Mr Farage remained an MEP for the entire period concerned and continued to draw an MEP’s salary.

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Asked if he had declared the money with the European parliament authorities, he said: “Of course not, it’s a purely private matter, non-political in absolutely every way.”

Mr Banks said: “Channel 4’s attempts to smear myself and Nigel come at a time when the Brexit Party is riding high in the polls, so it should come as no surprise to anyone.”

A spokesperson for the EFFD group said: "Mr Farage has received no such letter from the MEP conduct committee as of today.

"The Conduct Committee letter was leaked to C4 before their letter was received by Nigel. This is incredible especially given that Mr Farage raised the issue of confidentiality with conduct committee in first instance.