Home Minister Syed Hamid Albar said Buhary Syed Abu Tahir remained in the country and would be monitored.

"He is not a threat. The recommendation for him is to be released but he is a subject for us to watch over," Syed Hamid told reporters.

"Four years he has been inside, I think we have investigated what we need to investigate," he said.

The Star newspaper said that Tahir, who has permanent residency status in Malaysia, was released on June 6 and is under restrictions including a ban on going out at night without permission. He must also report to police weekly.

Tahir was described by US President George W. Bush in 2004 as the "chief financial officer and money launderer" for Pakistan's disgraced scientist Abdul Qadeer Khan.

Khan admitted passing nuclear secrets to Libya, Iran and North Korea in a televised confession in February 2004, placing him in the thick of a global atomic black market.

Tahir was arrested in May 2004 in the Malaysian capital Kuala Lumpur under the controversial Internal Security Act, which provides for detention without trial.

News of his release comes after Khan retracted his confession, denying selling blueprints for an advanced nuclear weapon to Iran or North Korea and telling AFP in an interview last week that Western countries were to blame.

The nuclear black market scandal embroiled Malaysian Prime Minister Abdullah Ahmad Badawi's son, Kamaluddin.

He owned Scomi Precision Engineering, which manufactured centrifuge parts seized on a ship headed for Libya.

The company was later cleared by a police probe and said it had been misled about the purpose and destination of the parts, allegedly ordered by Tahir on behalf of Pakistan's Khan.

Syed Hamid said Tahir's activities had been probed by a number of countries.

"All over the world people involved in this have taken necessary action at the local level so there is no necessity for us to hold him," he said.

Asked whether he would remain in the country, he said only that "for the time being he is here."

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