Former Turks and Caicos islands prime minister Michael Misick is under arrest in Brazil.
The BBC reports he fled the territory in 2009, after an official inquiry uncovered evidence of systematic corruption in sales of Crown land to developers.
The British government has confirmed it will seek his extradition.
Mr Misick is one of six ex-ministers facing charges and has previously denied wrongdoing.
Britain imposed direct rule in 2009 and had to issue a loan guarantee worth $US260 million to prop up the economy, which was already struggling to cope with damage caused by Hurricane Ike and the global financial crisis.
Rio de Janeiro Interpol chief Orlando Nunes said Mr Misick had been living in Rio de Janeiro for months. He had official papers that allowed him to work in Brazil.
The BBC reports he was arrested at Rio de Janeiro's domestic airport.
The Turks and Caicos islands are a tax haven and a popular holiday destination.
A measure of self-government was restored to the islands with elections last month.