The UK data watchdog is seeking a warrant to search the offices of political consultancy firm Cambridge Analytica.
The London-based firm is accused of harvesting the private information of 50 million Facebook users in a data breach.
The company, which worked with Donald Trump's successful US presidential election campaign, is also facing claims it offered to entrap politicians and used ex-spies to dig for dirt on potential targets.
The UK Information Commissioner is due to apply for a warrant to examine the company’s records today after it failed to respond to a deadline for access to its records.
Meanwhile Facebook has called off its own search of the company premises at the Information Commissioner’s request - amid fears it could potentially compromise a regulatory investigation.
The social media giant’s founder Mark Zuckerberg and other senior executives are facing calls to give evidence before British MPs.
Facebook has seen €37bn wiped off its stock market value over the saga. The stock fell by 7% on Monday.
Investors in the social media giant are worried about a new threat to its reputation and the possibility of legislation that could damage its advertising business.
Facebook is now due to hold an open meeting for all employees to ask questions about the scandal.
Both Facebook and Cambridge Analytica have denied any wrongdoing.