Australian police are investigating allegations about the misuse of A$12 million ($10.5 million) in Chinese funds during the 2013 political campaign of mining magnate Clive Palmer, The Australian newspaper reported on Monday.

Police are investigating information provided on behalf of Chinese government-owned CITIC Ltd (0267.HK), the newspaper quoted Stephen Brown, deputy police commissioner for Western Australia, as saying.

"I can confirm ... we have commenced to assess those materials to determine whether there has been any criminal activity, as part of our normal fraud investigation," Brown was quoted by the newspaper as saying.

The police did not make an official statement about the investigation and a spokesman declined to comment immediately on the matter when contacted by Reuters. An email sent by Reuters to Western Australia police media team remained unanswered.

Palmer denied any wrongdoing in an emailed statement to Reuters.

"Any allegations in relation to improper use of a trust are totally wrong," Palmer said.

China's CITIC earlier filed a lawsuit against Palmer, a member of the Australian upper house Senate, alleging misuse of money the company had put into a fund meant for operating its iron ore port in Western Australia.

CITIC declined to comment on the report of the police investigation when contacted by Reuters.

Palmer has denied the allegations, arguing the case was brought to embarrass him, amid a two-year-old legal fight between the two sides.