A bit of both. The Allies started denazification. Then the western allies and Germans who got into power (including Nazis) became less and less strict as they realized they needed some of them to build up structures of society, especially with the cold war beginning. And of course Nazis protecting Nazis.

The allies even gave some groups of Nazis weapons to prepare for a guerilla war in case Stalin invaded West Germany (see Gladio and other stay behind groups).

Not punishing Nazis for their crimes was so common that there is a word created for this specific meaning: A Nazi or collaborator basically getting pardoned or even getting the authorities formally void their offenses/atrocities: Persilschein. The word refers to a popular brand of laundry detergent, similar to the phrase"whitewashing".