Dapp, which runs education and health projects in the African country, has received millions of pounds in the last decade from the UK, EU and Unicef.
It is connected to the Teachers Group, whose leaders are wanted by Interpol over fraud allegations.
British officials have suspended funding and launched an investigation.
The move follows an investigation by the BBC and its US partners into Dapp Malawi, the Malawian branch of charity Development Aid from People to People.
Dapp is one of the major NGOs active in Malawi, providing a range of aid projects from farming to health and education.
The BBC found that part of the funding it received found its way to the Teachers Group, with some Dapp staff handing over as much as 30% of their monthly salary to the group.
Founded in the 1970s, for years the Teachers Group has run a government-funded alternative school system, but in 2001 the Danish authorities raided its offices and charged its founder Mogens Amdi Petersen with fraud.
Found not guilty in 2006, he and some of his associates immediately left the country, but prosecutors appealed and the group are now wanted by Interpol.
It is thought they may have taken refuge in a massive luxury compound, worth an estimated Â£20m, on the Pacific coast in Mexico.
In a statement, the Department for International Development urged the BBC to share all the information it obtained during its investigation into Dapp and Teachers Group, which included interviews with Dapp workers and Teachers Group members.
"Payments to Dapp have been suspended and we encourage the BBC to share their evidence in full."
The UK government is to stop giving money to a charity in Malawi following a BBC investigation which found it was under the control of a cult-like group.