THE SNP's business spokeswoman has been suspended from the party after it emerged that police are investigating allegations that her property dealings potentially involved mortgage fraud.

Michelle Thomson, who ran the pro-independence Business for Scotland campaign group prior to the referendum, said that she was looking forward to being cleared of any wrongdoing and pledged to co-operate with the Police Scotland probe.

Police sources emphasised that Ms Thomson was not currently subject of an investigation personally.

However, the move to withdraw from the SNP party whip at Westminster, which means the Edinburgh West MP will effectively sit as an independent and no longer serve as spokeswoman for Business, Innovation and Skills, will be seen as a major embarrassment to the party. It comes less than five months after the party won a historic landslide victory securing 56 seats at Westminster in the General Election.

The First Minister immediately faced questions over whether she knew about her MP's background before she was approved as an SNP candidate.

It follows revelations over Ms Thomson's dealings in the property sector, where she built a portfolio worth around £1.7 million, often by negotiating cut-price deals with homeowners in financial difficulty.

Her solicitor, Christopher Hales, was struck off following his role in 13 deals closely related to Ms Thomson in 2010 and 2011, after he failed to provide key information to mortgage providers which is required as a safeguard against fraud.

In a statement, Ms Thomson said: "I am aware of the police investigation and will cooperate fully if required to do so. I have always acted within the law and look forward to being cleared of any wrongdoing.

"I have this afternoon decided to withdraw from the party whip whilst an investigation takes place. Once the investigation is concluded I look forward to returning to play a full role in party activities. I will be making no further comment on this matter."

A spokesman for the SNP confirmed that Ms Thomson had also been suspended as a member of the party.

The deals, highlighted in a ruling from the Scottish Solicitors' Disciplinary Tribunal, include 'back-to-back' transactions where properties were bought and sold at a substantial profit hours later without the knowledge of lenders, and 'cashback' arrangements between parties that were also not disclosed.

The police probe was launched on the instructions of the Crown Office after the findings of the tribunal were formally passed on in July.

In its ruling against Mr Hales, the tribunal stated that he "must have been aware that there was a possibility he was facilitating mortgage fraud, whether or not this occurred" and that "the central role of Mrs Thomson and M&F Property Solutions [of which Ms Thomson was a partner]... should have set alarm bells ringing".

In one of the deals, a business partner of Ms Thomson's bought a home in Stirling for £64,000 from a cancer sufferer desperate to move, before selling it to Ms Thomson for £95,000 the same day. Ms Thomson then received a 'cashback' payment of more than £28,000 from her business partner.

Neither the £28,000 payment, nor the fact that the business partner had owned the home for less than six months, was disclosed to the lender, which provided a mortgage based on a purchase price of £95,000. Under guidelines, the mortgage company should have been made aware of both details.

In another, a home in Aberdeenshire was purchased by Ms Thomson for £245,000, before being sold on for £315,000 the same day to someone she knew.

A mortgage was provided to the second party on the basis that the purchase price was £315,000, with the cash transferred to Ms Thomson and used to cover the £245,000 deal.

On the instructions of Ms Thomson, £55,000 of the free sale proceeds was then transferred to a real estate company, with another £13,827.55 put into the bank account of Ms Thomson and her husband, according to the ruling. Again, the mortgage lender was not made aware of the £245,000 purchase.

Scottish Conservative chief whip John Lamont called on the SNP to explain what they had known about the business dealings.

He added: ‎"Having tried to ignore these serious allegations for 48 hours, the SNP has hit the panic button. The SNP promised a new politics at Westminster. It has taken a matter of weeks for their shine to wear off."

A spokesman for Scottish Labour said: "It is now vital that the SNP come clean about this situation, and who knew what, when. Michelle Thomson was vetted by the SNP and deemed to be an acceptable candidate for an election. Senior cabinet ministers have backed her citing her business dealings."

A spokeswoman said: "Police Scotland can confirm that as a result of a complaint from the Scottish Solicitors' Disciplinary Tribunal, it has been instructed by the Crown Office to carry out an initial investigation into alleged irregularities relating to property deals in the year 2010-2011."

A spokesman for the SNP said: “In line with party rules Michelle Thomson’s decision to withdraw from the party whip means her party membership is also suspended.”