Bernard Madoff used the London arm of his corrupt investment business as his personal “piggy bank”, British fraud investigators claimed yesterday.

Madoff Securities International, based in Mayfair, Central London, was “a cog in the global washing machine”, through which the jailed fraudster had laundered billions of pounds, they said.

Last year £1 billion passed from Madoff’s business in New York through one of his London firm’s accounts and then back across the Atlantic. Other London accounts were used to pay for the construction of a £5 million yacht, the Bull, which is at anchor near Antibes in the South of France.

His brother Peter Madoff, a director of the London firm, acquired an Aston Martin DB6 and, shortly before the business collapsed, $2 million was transferred to an account in the name of his wife, Ruth. The purchases were accounted for as loans and directors’ remuneration.

The activities of Madoff Securities are a key part of the global investigation into the $65 billion fraud. Glyn Powell, of the Serious Fraud Office, who is leading the British arm of the inquiry, said it appeared that the firm had “played a significant role in the operation of Bernard Madoff’s investment fraud”. The SFO will decide later this year whether there are grounds to bring criminal charges against some of Madoff’s British associates.

One source said that the SFO was looking into “three hypotheses about Madoff Securities International. One is that it was Madoff’s piggy bank. The second is that it was ‘a cog in the giant global washing machine’ to window-dress the fraud. The third is that it was both.”

The business was established in 1983 as Madoff Holdings and changed its name to Madoff Securities in 1988.

Madoff, who has pleaded guilty in the United States to money laundering, fraud and perjury, was the majority shareholder in the business and other members of his family, including his wife and brother, sat on the board.

At the time that his fraud was uncovered, late last year, Madoff Securities also listed five British-based directors: Stephen Raven, Chris Dale, Leon Flax, Philip Toop and Malcolm Stevenson. The directors put the company into liquidation in January and approached the SFO themselves. Insiders say that they have had no contact from the SFO since then.

The company, which was regulated by the Financial Services Authority and audited by KPMG, employed 25 people.

American investigators have spoken to the British traders, who told them that they followed a conservative investment strategy with very strict trading limits. Investments were made in blue chip stocks and traders were under instruction to minimise risks.

Madoff has described the London business in court testimony as “legitimate and honestly run”. In 2007 the trading arm recorded a profit of £7.6 million. But investigators suspect that legitimate trading on the markets could have been a front and that Madoff used the British firm to launder money.

No decisions have yet been made on what charges might be brought, but sources say that virtually every offence under fraud legislation is being considered. No arrests have been made.

Katrina Allison, head of City, Corporate and Public Funds Fraud at the SFO, said: “We expect to make a decision on whether to bring charges within he course of this calendar year.”

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