French magistrates on Tuesday formally began an embezzlement investigation into new International Monetary Fund chief Christine Lagarde, opening the way for possible criminal charges.
The court of justice of the republic asked three appeal court magistrates to investigate whether the former French finance minister is guilty of "complicity in forgery" and or "complicity in misuse of public funds".
If she is brought to trial and found guilty she could face 10 years in prison and a fine of 150,000 euros ($212,000).
Lagarde, who took up her new post last month, has denied any wrongdoing or illegality in a case stemming from a massive payment to a controversial tycoon out of public funds in 2008 when she was still a minister.
Lagarde has been accused of exceeding her authority by cutting short a legal battle between flamboyant businessman Bernard Tapie and a formerly state-owned bank by sending the case to private arbitration.