The "bad guy" in this film was smart but not as smart as Moriarty (not in the film) or Sherlock.
Was it a German spy or maybe that would have simply been too contrived?
Got the impression it was an American known to the public as a "good guy". Or, an English individual who had lived in America a very long time. He was another "bad guy" who wanted to give/sell information to Germans. At first appearance, he behaved like Moriarty and looked something like him so, at first, I thought it might be Moriarty (played by a different actor).
One on-line article said that Rathbone got tired of playing Sherlock due to the sameness of the individual wartime movies. He was under contract to make 3 a year for a certain number of years. But, he quit before finishing the contract -- apparently around 1946 (WW2 was over). It was also said that his first 2 movies set in the 1880/1890 period were "big budget" grade A. The wartime movies were deliberately grade B types.
We don't pay attention what's been written about the movies while watching. We don't pay attention to who's doing the acting. We just let a movie flow however it flows. The question the movie has to answer is: Was it an entertaining way to pass the time? So far, "yes" Only downside is the Watson character -- silly/dumb at times and it "sticks out" -- having seen how "serious and smart" Watson is in other Sherlock Holmes movies/TV shows.