Magnitsky fraud cash laundered through Britain, MPs hear

British officials must investigate the alleged laundering of $30m from a Russian tax fraud that may have been spent on items ranging from a couture wedding dress to a luxury yacht, a parliamentary committee was told on Tuesday.

Bill Browder, the UK-based fund manager, alleged that some of the proceeds of a $230m fraud unearthed by Sergei Magnitsky, the Russian lawyer, had funded “an orgy of spending on luxury goods”.

Magnitsky was arrested after raising the alarm over the fraud and died after being severely beaten in a Russian jail in 2009. The US subsequently passed an act to punish Russian officials said to be responsible for his death.

Mr Browder wrote to the UK’s National Crime Agency in March asking it to probe how millions of dollars from the Magnitsky fraud were allegedly sent to Britain. He told MPs London was “levitating off Russian dirty money” and said Britain needed its own version of the Magnitsky Act.

There is an increasing focus on Britain’s role, particularly London, as a destination for ill-gotten gains ahead of the anti-corruption summit that will be hosted by David Cameron, the prime minister, next week.

Mr Browder, whose Hermitage Capital Management was once the biggest foreign portfolio investor in Russia, successfully lobbied the US Congress to pass legislation freezing assets and denying visas to Russian officials allegedly involved in the Magnitsky case. He is pressing for European countries to pass similar laws.

Hermitage alleged that subsidiaries of its fund in Russia were used without its knowledge by Russian police and tax officials as vehicles to carry out the fraud, after Mr Browder was barred from Russia as a “threat to national security” in 2006.

The US-born Mr Browder told MPs on Tuesday that research by his team and documents from another Russian whistleblower had enabled them to establish clear evidence of a UK link to the Magnitsky affair.

He alleged a total of $30m flowed into Britain from companies he said were connected to the fraud. That allegedly included $2m from companies connected to Dmitry Klyuev, a Russian businessman who is on the US Magnitsky sanctions list and who Mr Browder calls the “suspected mastermind” of the tax fraud.

Mr Klyuev could not be reached for comment but he has previously denied any connection to the fraud and his spokesman said Mr Browder and Hermitage were trying to frame him.

Other Russian officials accused by Mr Browder have also denied involvement with the fraud. Russia has never taken any action against the officials, and some have been promoted.

In testimony to the Commons home affairs committee, Mr Browder alleged the $30m flowing into Britain was spent on items including:

● $240,000 on a yacht

● $176,084 on private jet hire

● $192,963 on services of a home interior and yacht design company

● $7.6m on “IT solutions and services”

● $819,351 on a range of high-performance car tyres

● $100,000 to a luxury architecture and interior design firm

The Hermitage manager has criticised British authorities for inaction over the Magnitsky affair, after making five previous complaints to British law enforcement authorities without any case being opened.

Eleven other countries have opened criminal probes connected to the Magnitsky fraud and six have frozen assets totalling $43m. “I cannot even describe to you the difference in response that I had in France and the US,” Mr Browder told the committee.

MPs Ben Bradshaw, Richard Benyon and Tom Brake have written to Theresa May, the home secretary, urging her to ensure the NCA “conducts a thorough and proper investigation” into Hermitage’s claims about the Magnitsky money in the UK.

Mr Browder has come under pressure in recent weeks with a film by a Russian-born filmmaker questioning his version of events and a Russian television documentary alleging links between him and Alexei Navalny, a Moscow opposition leader.

The fund manager told the Financial Times these were part of a “co-ordinated attack” aimed at discrediting him and the Magnitsky Act and halting investigations into the fraud.