An investigation into WA's former trade commissioner to Japan has taken another twist, with police now apologising for declaring he would not be charged over allegations he misused his position to pocket more than half a million dollars in taxpayer funds.

Key points: Police had said Craig Peacock couldn't be charged as the events happened in Japan

Police had said Craig Peacock couldn't be charged as the events happened in Japan The Attorney-General says police did not obtain appropriate legal advice

The Attorney-General says police did not obtain appropriate legal advice Mr Peacock has agreed to repay more than $500,000

A Corruption and Crime Commission (CCC) investigation found Craig Peacock — who represented WA in Tokyo for 17 years — double-dipped on his taxpayer-funded allowance to enrich himself, benefit his friends and cover up a drink-driving accident.

The CCC report found that in 2015, Mr Peacock used state resources to arrange for two Legislative Council members, Phillip Edman and Brian Ellis, to have $700 massages at a Japanese bathhouse known as a "soapland".

The alleged rorting of allowances by Mr Peacock included falsifying official documents, misappropriating expenses, tax evasion and double dipping.

Under a settlement reached with the WA Government, Mr Peacock has been given until next month to repay $540,000.

WA Police were investigating the matter but late last week issued a statement saying Mr Peacock would not be prosecuted.

"Due to the location of this incident (Japan), as there is no element of the offence having occurred in WA, WA Police Force will not be undertaking further action," a spokeswoman said.

Government demands answers

The statement surprised WA Police Minister Michelle Roberts.

"I was pretty stunned to hear that, because I just think its stands to reason given what's alleged to have occurred, that there would be consequences for that, and criminal consequences for that," she said.

Police Minister Michelle Roberts says she cannot direct police to charge someone. ( ABC News: James Carmody )

The Minister said it would be "extremely inappropriate" for her to interfere with a police matter, but a public explanation of the decision was required.

"I can't overturn a police decision and I can't direct them to charge someone," Ms Roberts said.

In response, WA Police said the initial statement to the media was "accurate at the time it was provided".

"However since then WA Police Force has had ongoing discussions with the Corruption and Crime Commission," a police spokeswoman said.

"Based on those discussions WA Police Force sought further legal advice and those discussions with the State Solicitor's Office are continuing.

"This means a number of matters remain under investigation at this time, which was not communicated in the response provided late last week.

"That was an error and WA Police Force apologises for this.

"There are complexities with jurisdictional issues which WA Police Force is working through with the State Solicitor's Office."

Attorney-General seeks legal advice

Earlier, Attorney-General John Quigley said police had decided not to prosecute without seeking formal legal advice from the Director of Public Prosecutions Amanda Forrester or the State Solicitor Nicholas Egan.

Craig Peacock was the former WA trade commissioner to Japan. ( Supplied )

Mr Quigley said members of the public would be left in a "state of wonderment" if criminal charges were not pursued.

"On a matter of this public profile, I would expect the police to have obtained legal advice at the very highest level, and that would have been the Director of Public Prosecutions in Western Australia," he said.

"I will be asking the DPP to give me a formal briefing note as to what the chances of convictions of Mr Peacock were.

"The money went from this jurisdiction to his [Mr Peacock's] trouser pocket."