National Accountability Bureau (NAB) officials arrested Malik Naveed Khan, said a spokesman for the Bureau. Khan will be produced in an anti-corruption court tomorrow for obtaining his physical remand, he said.
During preliminary investigations, Khan made "important revelations", he said without giving details.
Khan was also accused of misusing his position as the head of the Frontier Constabulary and conducting the illegal recruitment of about 500 people.
After receiving complaints, NAB began an inquiry against police officers of Khyber-Pakhtunkhwa for alleged irregularities in purchasing weapons, equipment and vehicles during 2008-10.
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Acting on a request from the police department, the provincial government approved the purchase and upgrading of weapons and equipments. An amount of over Rs 7 billion was released for the purchases in 2008-10.
An inquiry revealed there was gross violation of procurement rules by the purchase committee, which allegedly awarded tenders to contractors who had no previous experience of supplying such items and for which payments were made in advance.
Earlier, NAB arrested Budget Officer Javed Khan and a supplier named Arshad Majeed.