Swiss prosecutors drop Russian money-laundering inquiry

ZURICH (Reuters) - Swiss federal prosecutors have closed a decade-long investigation into a graft scandal linked to the 2009 death of Russian lawyer Sergei Magnitsky in a Moscow jail, they said.

The Office of the Attorney General (OAG) said on Tuesday it was dropping 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.

"Based on its extensive enquiries, the OAG can now confirm that the investigation has not revealed any evidence that would justify charges being bought against anyone in Switzerland," it said.

It did, however, order the forfeiture of more than 4 million Swiss francs ($4.4 million) of the 18 million francs originally frozen, as these sums could be traced to criminal activity in Russia, it said.

The OAG's investigation centred on suspected money laundering in Switzerland between 2008 and 2010 following a fraud committed in Russia at the end of 2007, which led to undue tax refunds worth $230 million. Funds were alleged to have been laundered in Russia, Switzerland and several other countries.

The decision comes amid critical media coverage of the Swiss investigation that have prompted the OAG 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.

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

The OAG said the circumstances surrounding Magnitsky's death and its political repercussions were not the object of its proceedings. It also revoked Hermitage's status as a party to its probe, saying it had not been able to determine that the funds under investigation originated from an offence committed to Hermitage's detriment.

($1 = 0.9181 Swiss francs)

(Reporting by Michael Shields; Editing by Alex Richardson)