Benazir had appealed before the Police Tribunal in Geneva after being convicted earlier, together with her jailed husband Ali Asif Zardari and their Swiss lawyer, for illegally taking the money from two Swiss firms for a 1994 customs inspection contract.

But the ruling by the court passes the case back again to the regional prosecutor who must now decide how to proceed against the three.

Benazir, her husband and the lawyer had been pronounced guilty by a Geneva investigating magistrate on 30 July of laundering the money through Swiss bank accounts and handed down a six month suspended jail sentence.

The conviction had prompted Benazir to appeal before the Police Tribunal.

Misleading reports

Earlier reports during the day however had quoted a Pakistani-senator of Benazir's Pakistan People's Party as saying that the tribunal had quashed the convictions.

"The Geneva Police Tribunal has accepted her appeal and quashed the six-month suspended sentence order," senator Farhatullah Babar had said.

The money laundering conviction was a major embarrassment for Benazir, though she maintained the charges were politically motivated.

Her husband faces several other corruption charges and is in jail in Pakistan.

Benazir had been Pakistan's prime minister between 1988 and 1990 and again from 1993 to 1996.