Swiss prosecutors set to drop Russian money-laundering inquiry

ZURICH, Nov 20 (Reuters) - Swiss federal prosecutors are set to drop a nine-year investigation into a graft scandal linked to the 2009 death of Russian lawyer Sergei Magnitsky in a Moscow jail and unblock most of the related money frozen in Swiss bank accounts.

The Office of the Attorney General (OAG) confirmed a report in the Tages-Anzeiger paper on Friday that it was ending its inquiry into whether Russian officials defrauded tax authorities and laundered the proceeds through Swiss banks, as alleged by businessman Bill Browder’s investment fund Hermitage Capital.

“The OAG is planning at this stage to order the closure of the Swiss investigation, together with the forfeiture of part of the assets currently under seizure,” it said by email.

Between 1 million and 4 million Swiss francs ($1.1-4.4 million) of the 18 million francs originally frozen will likely be confiscated as these sums could be traced to criminal activity in Russia, it said.

The OAG outlined the steps it had taken to track down evidence in the “complex case” but did not spell out why it had dropped the inquiry.

The decision comes amid critical media coverage of the Swiss investigation that prompted the OAG in July to defend its record as an independent enforcer of the law.

One former Swiss official involved in the investigation has been convicted of accepting gifts from Russian prosecutors.

Browder has led a campaign to expose corruption and punish Russian officials whom he blames for the death of his lawyer Magnitsky, who was arrested in 2008 after alleging that Russian officials were involved in large-scale tax fraud, and died in a Moscow prison after complaining of mistreatment.

“Dropping this investigation is an invitation for money launderers to come to Switzerland. They have nothing to fear here,” Browder told the Tages-Anzeiger.

Russian prosecutors have said they suspect Browder of ordering a string of murders, including of Magnitsky, in a twist the financier has dismissed as ludicrous.

$1 = 0.9100 Swiss francs Reporting by Michael Shields Editing by Mark Heinrich