Thailand's government threatened legal action on Monday against a banned opposition party which claimed Prime Minister Prayut Chan-O-Cha aided in the cover-up of Malaysia's 1MDB graft scandal by harbouring a fugitive financier.

The stridently anti-military Future Forward Party, the third largest in parliament, was dissolved Friday by a court and its key members banned from politics for a decade.

On Sunday Future Forward's spokeswoman Pannika Wanich held a public conference and accused Prayut of allowing fugitive financier Low Taek Jho -- commonly known as Jho Low -- and his associates to pass through Thailand.

Low is wanted by several governments for his alleged mastermind role in plundering billions of dollars from Malaysia's sovereign wealth fund 1MDB.

A Thai government spokeswoman hit back Monday at Pannika, saying her accusations were "not true".

"This accusation ... confuses the public," Narumon Pinyosinwat said on Twitter. "Concerned ministries are considering legal action and ... will hold a formal presser."

Walking to government house on Monday morning, ex-general-turned-premier Prayut appeared jovial when asked about Pannika's accusations.

"The ministries are investigating and if it's not true, they can sue," he told reporters. 

Since 2016, a "red notice" was issued by Interpol at Singapore's request to flag Low's travels.

Countries receiving flagged individuals would typically inform requesting governments about the fugitive's whereabouts, executing an extradition process. 

But Pannika claimed that Thailand's immigration records showed Low passing through the country five times from 2016 to 2018.

She also said two of his associates -- Tang Keng Chee and Jasmine Loo -- had irregularities in their records, and she accused Prayut's government of "obstructing international justice".

The gruff former army chief masterminded a coup against the government in 2014, and was head of a junta regime until 2019.

He was voted in during last year's election as a civilian premier under a new military-scripted constitution which critics say tilted victory to his party.

Future Forward has been a thorn on the conservative establishment's side since it scooped up 6.3 million votes.

The party's radical anti-military agenda appealed to mostly to millennials or those weary of the conservative royalist army's central role in Thai society.

But the party was undone by a $6 million loan from its billionaire founder, which breached the limit on party donations from an individual.

Dissolution of the Future Forward Party came ahead of a censure debate beginning in parliament Monday against Prayut.