Kaupthing collapsed in 2008
The Serious Fraud Office (SFO) is to investigate the activities of Icelandic bank Kaupthing before its collapse in October last year.
The SFO said it would study whether the bank misled savers to encourage deposits into its high interest Kaupthing Edge accounts in the UK.
More than 30,000 of the accounts were taken up by British investors.
The SFO said it would also investigate why substantial funds flooded out of the bank in the days before it failed.
Kaupthing, once Iceland's biggest bank, collapsed along with a number of Icelandic banks during the height of the banking crisis last year.
British money still tied up in the failed banks became a subject of tension between the UK and Icelandic governments.
The UK was forced to intervene on behalf of savers to ensure money was paid back.
An SFO spokesperson added that investigators would be working closely with Icelandic authorities during the investigation, but was not able to say how long the investigation would last.