SPANISH police said yesterday that they had smashed Europe’s largest money-laundering ring in Marbella, the centre of the country’s so-called Costa del Crime.

More than 300 police officers involved in a 10-month investigation moved in on suspects at the weekend, arresting seven lawyers and three notaries and seizing assets worth about €250 million (£175 million).

The assets included 251 properties, among them two entire housing developments, 42 luxury cars including Porsches and Rolls-Royces, two aircraft, a yacht, works of art and jewellery.

Police estimate that €600 million (£420 million) could have been laundered. Investigators say the scale of the fraud is such that they will need up to a year to unravel the network of more than a thousand companies registered in Canada, the United States and across Europe through which money has been siphoned and invested illegally in Spain’s burgeoning property market.

Up to €30 million has been frozen in Spanish bank accounts and another €410,000 in cash was seized. Juan Carlos López Caballero, the chief anti-mafia prosecutor on the Costa del Sol, gave a warning that “the worst is yet to be unveiled”. The Interior Ministry said that there could be further arrests.

Police alleged that the nerve centre of the laundering operation — which is said to have “washed” money from drugs, prostitution, extortion, arms dealing, kidnapping and fraud — was a law office in Marbella owned and run by Fernando del Valle, a Chilean citizen who has lived in Spain for 20 years. Señor del Valle appeared before an examining magistrate yesterday. His associates have all been released on bail while the investigation continues.

The investigation, codenamed Operation White Whale, is believed to have also identified people who siphoned funds from the Russian oil firm Yukos without the company’s knowledge as part of a bigger money-laundering ring.

“These are individuals who from inside the Russian company appear to have diverted sums of money . . . which then left the country without the knowledge of the company or the tax authorities,” a source close to the investigation said.

The source declined to say how many of the 41 people arrested were Russian, but other nationalities included Spanish, French, Algerian, Moroccan, Finnish and Ukrainian citizens.

“They seem to have been ripping (Yukos) off, to invest in a Dutch company, which then sent the money to Spain,” the source said. Yukos denied any involvement. Alexander Shadrin, a spokesman, told Ekho Moskvy radio that such reports were “nonsense”. He added: “The only place left to look is on Mars. Did we launder something there?”

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