Malaysian police said they have arrested hundreds of suspects as part of an investigation into child abuse at care homes run by an Islamic conglomerate.

In what is believed to be the worst such case to hit the country in decades, police said Saturday they had arrested 355 people, including religious studies teachers and caregivers, and rescued more than 400 children.

At the heart of the investigation is the Global Ikhwan Service and Business (GISB) group, which has long been controversial for its links to the banned Al-Arqam sect.

Police said they had arrested GISB leader Nasiruddin Ali along with 30 other members of the group after carrying out raids on scores of premises, including charity homes, businesses and religious schools.

On Tuesday, Malaysia's police chief Razarudin Husain said authorities had frozen 96 accounts linked to the group containing approximately $124,000 and seized eight vehicles.

GISB initially denied the allegations, insisting they did not run the care homes searched in the states of Selangor and Negeri Sembilan.

But in a video posted to the company's Facebook page last week, chief executive Nasiruddin acknowledged "one or two sodomy cases" took place at the shelters, while denying allegations of widespread abuse.

Medical screenings show that at least 13 children suffered sexual abuse, Razarudin has said.

The case has sparked concerns about the welfare of children in care facilities and the regulation of charitable organisations in Malaysia.

The Al-Arqam sect was banned by the authorities in 1994 for deviant teachings, while GISB members had in 2011 set up an "Obedient Wives Club" that called on women to be "whores in bed" to stop their husbands from straying.

According to its website, GISB says it is an Islamic company that runs businesses from supermarkets to restaurants, and operates in several countries including Indonesia, France and the United Kingdom.

Religious authorities in Selangor state have said they are closely monitoring GISB's activities.

Police believe the 402 minors in the care homes were all children of GISB members, according to Razarudin.