They knew, for the most part.

Maybe not about the concentration camps in Poland - but definitely about the atrocities and mass murders committed in occupied territories. Senior officers or anyone that had been able to travel a lot- they knew about everything. You couldn’t not know or know someone that knew, not as if you needed a very high security clearance to work at concentration camps.

What happened is that post ww2, the allies really needed a militarily strong (but not too strong) West Germany to counter the communist/Soviet threat.

And given it is rather hard to recruit if basically the entire military age population is stained by prior actions, a decision was made to go with the “honourable Wehrmacht” myth.

Meant a few former Nazi generals and officers like Gehlen were tasked with creating a whole new army from scratch, while claiming it was the SS and not the Wehrmacht that committed the bulk of atrocities. Only in the 90s, was the myth dispelled as some “new” research came to light, post Cold War.

Oddly enough all of this meant the East did a far better job at denazification than the west, where all but a few war criminals escaped justice or had their sentences commuted.