LONDON/PARIS (Reuters) - Police in Britain have arrested a man on suspicion of conspiracy to murder a British family of Iraqi origin who were killed in a high-profile murder in France last year, French public prosecutor Eric Maillaud said on Monday.

Saad al-Hilli, an Iraqi-born British engineer, was found shot dead in September 2012 with his wife and mother-in-law in their BMW car on a remote mountain road near the village of Chevaline, with the body of a cyclist, Sylvain Mollier, discovered nearby.

They were killed in what appeared to be execution-style murders, with at least two hits to the head from a semi-automatic pistol.

Speaking to Reuters, Maillaud identified Saad al-Hilli's brother Zaid as the man arrested.

"Several lines of questioning closed over time... The main theory today is linked to the family," he said.

"There seems to have been a real desire on Zaid's part to recover his father's wealth, to Saad's detriment, by any means necessary, including illegally."

Maillaud said there was no formal evidence, but that police now had enough elements to question Zaid as a suspect.

Hilli's two daughters survived the attack, despite the gunman trying to kill the eldest - 7-year-old Zainab - by beating her around the head after running out of bullets.

Four-year-old Zeena was found safe hiding beneath the legs and skirt of her dead mother in the backseat of the car.

The brutality and unexplained nature of the killings led to prominent coverage of the case in British media.

Investigators have said previously they were looking at various theories, including robbery, a family feud, a possible link to Hilli's work in the aerospace industry or his Iraqi origins.

(Reporting By Costas Pitas in London and Gerard Bon in Paris; writing by John Irish; editing by Stephen Addison and Michael Roddy)