Alexandre Djouhri, the subject of a European arrest warrant, was apprehended at Heathrow Airport on Sunday and remanded in custody after a hearing at Westminster Magistrates' Court on Monday.
A spokesman for London's Metropolitan Police confirmed Djouhri's arrest "under a European arrest warrant".
"The warrant was issued by French authorities for offences of fraud and money laundering," the spokesman added.
A court official said Djouhri would remain in custody at least until another court appearance on Wednesday at which "he could be released on bail or could be kept in prison" pending a formal extradition hearing.
)
)
)
Djouhri has been a focus of the inquiry, opened in 2013 by judges investigating claims by former Libyan ruler Moamer Kadhafi and his son Seif al-Islam that they provided funds for Sarkozy's election effort.
But Djouhri, well known among France's rightwing political establishment and a close associate of Sarkozy, has refused to respond to summons for questioning in Paris.
Formerly employed by the French environmental services group Vivendi Environnement, now Veolia, he is often described as a go-between for deals involving water systems, trash collection and oil.
Cash-filled suitcases
In 2016, the former president's links with Kadhafi came under heightened scrutiny after another businessman, Ziad Takieddine, admitted delivering three cash-stuffed suitcases from the Libyan leader for Sarkozy's first presidential bid.
In a media interview, Takieddine said he had made three trips from Tripoli to Paris in late 2006 and early 2007, each time carrying a suitcase containing 1.5 billion to 2 billion euros ($1.8 to $2.4 billion).
Sarkozy has dismissed the allegations as the claims of vindictive Libyan regime members furious over his participation in the military intervention that ended Kadhafi's 41-year rule.
French investigators expanded their investigation in 2016 to suspicions of embezzlement in the 2009 sale of a villa in the French Alps, for around 10 million euros, to a Libya investment fund managed by Bashir Saleh.
Djouhri is suspected of being the true owner of the villa, which was sold at a "very inflated" price, a source close to the inquiry told AFP.
Both men failed to heed summons for questioning issued by the anti-corruption investigators in September 2016.
Investigators also suspect Djouhri of helping Saleh get out of France in spring 2012, as he faced a Libyan arrest warrant a few months after Kadhafi's overthrow.
Saleh, Kadhafi's former chief and staff and manager of Libya's multi-billion-dollar sovereign wealth fund, eventually escaped to South Africa, and has been sought since then.
In a series of conversations caught by wiretap, Djouhri can be heard promising to send judges a letter whereby Saleh would deny any Libyan financing of Sarkozy's campaign.