Former leader Dr Mahathir Mohamad has given Prime Minister Anwar Ibrahim seven days to retract his claim of having amassed wealth for himself and his family members, failing which he said action will be taken.
Speaking at a press conference in Putrajaya, Mahathir described the remarks made at a recent PKR event as "severe slander".
He was referring to the PKR congress, where Anwar in his presidential address made a veiled jibe at Mahathir after the former prime minister accused him of trying to silence dissent.
In his speech, Anwar said among others that a "certain person" who had led the country "for 22 years plus 22 months" was now talking about the plight of the Malays.
"How would they not if you monopolised them for yourself, your family and your children? Now that you've lost power, you talk about the masses," Anwar had said.
Mahathir said although Anwar had not named him, it was clear who he meant.
"This is slander, unless he can show proof that I received billions of ringgit and spirited the money abroad, and that I don't pay taxes," he said.
"He made many accusations in his speech. Now he is the prime minister, and it is incumbent on the prime minister not to make accusations lightly without clear proof."
Mahathir added that his lawyer Rafique Rashid had started the process of serving the notice to Anwar yesterday.
He said his notice to Anwar was a "test case", adding that there were no plans at the moment to take action against others who made the same claim.
"In the case of Anwar, he is the prime minister. So he is more credible. Other people may say a lot of things, but they are not taken seriously.
"Anwar said this in a meeting to his (party) members, accusing me of running away with money, or not paying my income tax and all that. That is very serious coming from the prime minister."