Updated 2.14pm with calls for an inquiry in view of a previous conviction.
Malta's consul to Shanghai was charged with money laundering on Sunday after police discovered a large sum of money hidden in his home.
Aldo Cutajar, 55, was remanded in custody after being arraigned in court by the police's Economic Crimes Unit along with his wife Isabel.
The police told the court, presided by Magistrate Josette Demicoli, how investigators had discovered some €500,000 in cash during a raid on his home in Naxxar on Saturday. Between $300,000 and $400,000 was also believed to be held in an account in his name in Dubai.
Investigators also found jewellery, luxury goods such as a Rolex watch, fine wine, and other collector's items in government official's home.
The money laundering racket was allegedly facilitated through property dealings in Cyprus that were believed to be funded by the proceeds of crime.
Cutajar was also accused of committing a crime which he, as a government official, was duty-bound to prevent.
Investigators said they had received a tip with confidential information about the racket and began an investigation that led them overseas from Cyprus to Dubai and China.
Mario Cutajar distances himself
In a statement, Mario Cutajar, Principal Permanent Secretary, said he did not know anything about his brother's dealings and was only responsible for his own actions.
He, therefore, had nothing to do with this case and he was not consulted when his brother was appointed first to Beijing and later Shanghai.
Nonetheless, on hearing about the arrest, Mr Cutajar said he had written to the police commissioner saying he was ready to give the police access to any information of his own finances, should they need to.
The police had not contacted him and he was not involved in the arraignment in any way, Mr Cutajar said.
As head of the civil service, he had issued instructions for disciplinary action, in which he would not be involved, Mr Cutajar said.
This was further evidence, he added, that the institutions worked for everyone in this country.
Call for inquiry in view of a previous conviction
Opposition MP Jason Azzopardi said the government must set up a public inquiry led by a sitting judge to determine how Cutajar was allowed to join the civil service after 2013 when he had a previous conviction for fraud and an interdiction imposed by the court.
Azzopardi said that after March 2013, when Cutajar's brother, Mario, was made principle permanent secretary, Aldo was again employed in the public service.
The inquiry should establish who was responsible for Aldo Cutajar's re-employment with the public service in breach of a court order banning him from working with the State and how the court decision was removed from the court's online records.
The Civil Society Network in a separate statement also called for an inquiry into the case.