Of course, the whole concept is ridiculous (see the title card above for Universal's non-explanation), but come on--it's fun! The movie's titled Sherlock Holmes and the Voice of Terror, and the plot is: radio broadcasts coming from Germany announce sabotage to British munitions factories,ships, and the like. Holmes deduces that there must be a leak coming from the Security Council, and sets about trying to find the culprit. As it turns out [spoiler alert], the villain has been a German mole who has been placed in England, replacing a British official who died in the first world war, since 1918! Yes, he's been a mole for 24 years, just waiting for his chance to strike! When caught, he immediately clicks his heels and starts speaking with a thick German accent, saying something about how the fatherland thinks in the long term!
"I spent three years at your Cambridge University..."
Now, of course this is ridiculous--the Nazi party did not gain strength until 1925, so there's no consistent chain of command for this deep-cover mole. I suppose the idea was that he remained in readiness for whatever government his country had. Did the Weimar Republic (1919-1933) just pass him on to the National Socialists? But the fact that this makes no sense is part of the charm of the movie. Since it was a propagandistic wartime piece and light entertainment, there was no place for subtlety in portraying the enemy. People just wanted to see Sherlock Holmes and Dr. Watson kick some Nazi butt! And they did! There were 11 more films in the series, over the next 4 years or so.