Foreign Secretary James Cleverly has been urged to challenge Switzerland over its plan to hand back millions in seized assets to Kremlin-linked Russians who have been sanctioned in the UK.

Swiss authorities are set to return 15.3 million dollars (£12.72 million) to three individuals accused of being involved in one of the largest tax frauds in recent Russian history as exposed by the late lawyer Sergei Magnitsky, who then died in a Russian prison in 2009.

MPs have written to Mr Cleverly, demanding that he put pressure on his Swiss counterpart to prevent the stolen funds from being given back, as well as urging him to consider downgrading the mutual legal assistance treaty with the Swiss government due to the “bad faith displayed in this case”.

Labour former frontbencher Dame Margaret Hodge and Conservative former minister Jonathan Djanogly wrote: “The UK has made every effort to lead the way on holding Russia to account for (Russian President Vladimir) Putin’s invasion through wide-ranging sanctions and providing support for Ukraine.

“It seems unreasonable that our supposed ally would return clearly ill-gotten gains to these Kremlin-linked perpetrators.”

Swiss law enforcement ruled last year that the laundered money could be given back to Vladlen Stepanovs and Dimitry Klyuev – who have been sanctioned under the anti-corruption Magnitsky laws by the UK, US, Canada and Australia – and Denis Katsyv – who has paid a settlement in the US and is under criminal investigation in the Netherlands for his involvement in the Magnitsky case.

Bill Browder, the financier who employed Mr Magnitsky and leads the Global Magnitsky Justice Campaign, told the PA news agency: “Switzerland are living up to the label of a banana republic and should be treated as such by the British Government.

“First there was Nazi gold, then dictators’ money and now they are returning money to UK-sanctioned individuals with ties to the Kremlin in the middle of Putin’s murderous war in Ukraine.

“This money should be used for the relief and reconstruction of Ukraine instead.

“The British Government should use every means to put pressure on the Swiss not to send this money of criminal origin back to Russia.

“This case is the just tip of the iceberg and countries like the UK and US should downgrade their legal relations with Switzerland to reflect the black hole of dirty money in the country.”