A Washington consultant told congress yesterday that the Clinton administration had covered up a failed CIA attempt to infiltrate a money laundering venture run by KGB agents including a former close aide of the Russian president, Boris Yeltsin.

Testifying to a house of representatives committee investigating Russian money laundering in the United States, Karon von Gerhke-Thompson said the CIA and the White House were well aware of the role played by top Russian politicians and intelligence officials in the flow of embezzled funds through US banks.

Her evidence provided fuel for critics who argue that the Clinton administration, in its unquestioning support for the Yeltsin regime, turned a blind eye to blatant corruption in the Kremlin, and thus helped encourage the growth of Russian organised crime and money laundering.

Ms Von Gerhke-Thompson, the vice-president of a political consulting firm called First Columbia Co Ltd, told the house banking committee she had been approached in 1993 by Alexandre Konanykhine, a young Russian tycoon, Yeltsin fundraiser and member of the Russian president's entourage on his visit to Washington the previous year.

He presented himself as the US vice-president of Menatep Bank, owned by one of Russia's most powerful financial oligarchs, Mikhail Khodorkovsky.

"Konanykhine alleged that Menatep Bank controlled $1.7bn [£1bn] in assets and investment portfolios of Russia's most prominent political and social elite," she recalled. She said he wanted to move the bank's assets off shore and asked her to help buy foreign passports for its "very, very special clients".

In her testimony to the committee Ms Von Gerhke-Thompson said she informed the CIA of the deal, and the agency told her that it believed Mr Konanykhine and Mr Khodorkovsky "were engaged in an elaborate money laundering scheme to launder billions of dollars stolen by members of the KGB and high-level government officials".

She said she agreed to go along with the passport buying scheme and report back to the CIA, a claim confirmed by intelligence officials interviewed by the Washington Post newspaper. It quoted them as saying Mr Konanykhine was one of an elite group of rich young former communists, known as the "miracle boys", who helped the KGB move large quantities of embezzled money abroad.

Mr Konanykhine, now 33 and living in New York, denies any links to the KGB or claims he was involved in large-scale money laundering. He told a US journalist it was normal for Russian businesses to offer clients foreign passports in return for big investments. He was granted political asylum after saying he would be killed by the Russian mafia.

Ms Von Gerhke-Thompson's attempt to infiltrate the Menatep Bank was cut short in September 1993, when Mr Konanykhine and his colleagues broke off contacts. She said she was told by CIA officials that her role had been compromised by Aldrich Ames, a Russian mole uncovered in the CIA in 1994.

She said Mr Konanykhine had broken off links during a trip to Turkey which coincided with a visit there by Mr Ames.

However, Ms Von Gerhke-Thompson told the committee neither the operation nor its failure were reported to congress, as stipulated by the national security act. The silence, she argued, was to avoid embarrassing US policymakers.

"It seemed to me that it was a 'policy' versus 'intelligence' failure," she said.

"Konanykhine's money laundering trail led directly to Boris Yeltsin. It was a politically unpalatable situation for the Clinton administration, the Yeltsin administration and the CIA."