The heir to the throne, 72, told bosses at his charitable foundation that he did not know its CEO - his former valet Michael Fawcett - had offered to help secure a knighthood and British citizenship for a Saudi billionaire who gave ￡1.5million to royal charities.
Charles presented Mahfouz Marei Mubarak bin Mahfouz with an honorary CBE in 2016 at a private ceremony at Clarence House - but says he had no idea Mr Fawcett had offered to upgrade it to a knighthood and support a citizenship application in a letter written a year later.
Mr Fawcett, 59, has stepped down permanently from his ￡95,000-a-year post at The Prince's Foundation while an internal investigation continues.
Scotland Yard, which received a number of complaints in September alleging that the Prince and Mr Fawcett could have breached the Honours (Prevention of Abuses) Act 1925, is contemplating action.
"Officers are carrying out an assessment of the information within the letter and are making initial inquiries," a spokesman for the Metropolitan Police said yesterday. "No investigation has been launched."
Mr Fawcett, who has worked for Charles for almost 40 years after starting as a footman to the Queen in 1981, temporarily stood down in September when news of the scandal first broke.
He has now decided to quit permanently after losing five stone and suffering ill health during the probe.
Charles, who has accepted his resignation twice before - and was said to have given him a ￡500,000 payoff in 2003 after he quit over a critical report into the running of the Prince's household - is understood to have decided that it was right for him to go.
Sources say Camilla and other senior royals were keen that the Prince should end his working relationship with Mr Fawcett.
The foundation refused to discuss whether Mr Fawcett had again been given a payoff, but other sources suggested that he had not.
Some royal commentators suspect Mr Fawcett, who set up an events and hospitality firm called Premier Mode which Charles used extensively, would soon be back in his inner circle.
Former Liberal Democrat MP Norman Baker, a transport minister in David Cameron's coalition government and the author of a book about royal finances, said: "I think it has damaged Prince Charles and I think it shows over the years he's shown a lack of judgment when it comes to judging an individual's character."
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Some called him Rasputin for the devastating hold he had over his royal master. Others took a more pragmatic view, recognising Prince Charles's need for an independent mind around him. Either way, the spectacular fall from grace of Michael Fawcett has courtiers and those closer to the prince breathing a sigh of relief.