In my Passat TDI '94 Jn Variant, which had a manual air conditioning system installed 6 years ago, it has recently started to smell bad whenever the air conditioning is running.
If you turn them off, meaning only the fan is running, there is no smell, so it cannot be coming from the regular heating system (e.g., the air filter).
That's a normal smell from the mold. The solution is to sterilize the equipment in the workshop. Approximately 40 euros.
Or, you can buy a special climate disinfection spray at a specialized store.
I would definitely do that, as those bacteria are not necessarily beneficial to health.