The issue of mold/mildew/bad smell in the ventilation systems of BMWs is pretty well documented in other posts. You typically smell it when the AC is off and it doesnt have anything to do with AC performance or the cabin filter. I have had it in several cars despite trying to turn the AC off a few miles from my destination to allow the system to warm up and avoid condensation in the system. Somewhere there was an older 3 series DIY regarding de-odorizing and cleaning the parts of the system, but it was pretty involved and required getting up and into the dash to expose parts (condenser?) of the system. There are also other posts describing how to spray chemical agents into the system through the front cowl in the engine compartment. I think I saved links to them, so I will try and post when I find.
BMW dealerships also have a typical AC air duct cleaning service. I have a $99 coupon (list for service is $260) that describes the work as follows: "The system will be deodorized and sanitized using a BMW approved process. An antifungal and sanitizing agent will be fogged through the ducting and A/C systems removing odor causing fungus and bacteria".
BMW PPK V2, BMW PE, Dinan Stage 1 suspension w Koni adjustable dampers, M3 26mm sway bar, M3 front control arm kit, M3 strut brace, M3 steering wheel, Michelin PSS