GENEVA – Switzerland, keen to shed its lingering image as a haven for dirty money, is returning to Mexico $74 million stashed abroad by Raul Salinas, brother of the former president, authorities said on Thursday.

'These funds belong to the (Mexican) state because they have been misappropriated. The money will be returned soon,' said Folco Galli, spokesman of the Swiss federal office of justice.

Lengthy investigations by Swiss and Mexican judicial authorities to trace the funds frozen since late 1995 had demonstrated 'the clearly criminal origin of these assets', a statement from the Swiss justice authorities said.

But Swiss authorities said the investigation had not established a link between the public funds and drug-smuggling.

A further $36 million has been unfrozen and so made available to the unnamed account holder, after authorities determined that these funds were not of illicit origin, it said.

The decision ends the long-running Swiss case involving $110 million blocked in Switzerland, Britain and other European countries, according to judicial sources. A Citibank account in Britain was among them.

WITHDRAWAL

It erupted in November 1995 when Raul Salinas's wife Paulina Castanon tried to withdraw $84 million from a Swiss bank account in Geneva with documents in a false name used by her husband in some financial affairs.

In the first few years, Swiss investigators including former Attorney-General Carla del Ponte said that the funds were the proceeds of protection of lucrative drugs racketeering.

Swiss examining magistrate Paul Perraudin, who handled the case, told Reuters on Thursday: 'One can reasonably say that the trail of drug trafficking has not been verified.'

Swiss and Mexican investigators determined that the seized funds had been diverted from public coffers, although Raul Salinas has always maintained that their origin was legal.

'There has never been a ruling in Switzerland or Mexico establishing that the money now being returned to Mexico stems from a crime,' said Jean-Marc Carnice, Salinas's lawyer in Geneva.

Mexican authorities are conducting a criminal investigation into the activities of Raul Salinas and others in connection with embezzlement and money-laundering, the Swiss statement noted.

He was released from a jail outside Mexico City in June 2005 after serving 10 years of a 27-year murder sentence which was overturned. He had been convicted on charges he masterminded the killing of a prominent Mexican politician in 1994.

Over the past 20 years, Switzerland has returned some $1.6 billion in illicit funds stashed in the Alpine country by strongmen including Ferdinand Marcos of the Philippines, Haiti's Jean-Claude 'Baby Doc' Duvalier, ex-Zairean leader Mobutu Sese Jeko and Nigeria's Sani Abacha.

'Switzerland has clearly improved its standards of diligence and international cooperation. This case is a further demonstration of Switzerland's willingness to act resolutely to prevent abuse of its financial centre and return assets of criminal origin to the victims,' Perraudin said.

(Editing by Jonathan Lynn and Charles Dick)