By Stelios Orphanides
FBME Bank, which effectively went out of business when the US branded it a financial institution of primarily money laundering concern, assigned the duty of preventing transactions involving illicit funds to a person who appears to have presented a forged Harvard degree to authorities, documents suggest.
The existence of the forged MBA degree was revealed three months after the Central Bank of Cyprus (CBC) placed the Cyprus branch of the Tanzanian-based bank under administration and resolution in July 2014, the documents obtained by the Cyprus Business Mail show.
One of the documents is a copy of the alleged MBA Harvard degree –submitted also to the CBC in April 2011 – when FBME appointed Lilit Khachatryan as its money laundering compliance officer (MLCO). According to the document, Khachatryan appears to have acquired her MBA degree on June 7, 2007.
Banks appoint money laundering compliance officers to ensure compliance with anti-money laundering and terrorist financing legislation. This involves inter alia, identifying and reporting suspicious transactions and activities, overseeing know-your-customer processes, identifying high-risk customers including politically exposed persons (PEP) – who pose a higher corruption and bribery risk – and keeping records.
In its first official response to the allegations of the US treasury department’s Financial Crime Enforcement Network (FinCEN), FBME also had its lawyers at Hogan Lovells US LLP highlight that it had employed an anti-money laundering guardian who graduated from Harvard. In 2014, the Harvard MBA was first in the Financial Times Global MBA rankings.
“The current MLCO received her MBA from Harvard Business School (HBS) and has over a decade of banking experience,” Hogan Lovells said on September 22, 2014 in a letter to FinCEN, which is tasked with combating money laundering.
“As evidenced by the CBC correspondence approving her appointment in April 2011 and as noted by EY (Ernst & Young) in its assessment, FBME’s MLCO ‘has the requisite qualifications (e.g., knowledge, skills, experience) and seniority to discharge her duties’”.
The copy of the Hogan Lovells letter is still publicly accessible at www.fbmeltd.com.
EY, one of the largest accounting firms worldwide, also included a reference to Khachatryan’s alleged Harvard degree in their preliminary report, also dated September 22, 2014.
A subsequent inquiry in October 2014 by Quinn Emanuel Urquhart & Sullivan LLP, another law firm representing the owners of the bank, exposed Khachatryan’s claims to possess a Harvard MBA degree as false.
“Unfortunately, the diploma you have been given is a forgery,” said Adrienne Odasso, at the MBA Registrar Services of the Harvard Business School in an emailed response to Lauren Dickie, a legal consultant at Quinn Emanuel on October 17, 2014.
The forged degree carried the wrong Harvard insignia, used the wrong fonts and even included a wrong phrasing, Odasso said. Further, the forgery reads “Master of Business Administration” instead of “Master in Business Administration” which is the case with real diplomas. In addition, the names of the academic institutions president and dean were “demonstrably incorrect”.
“Team, please see below on Harvard issue,” an alarmed Dickie told associates afterwards. “Not good”.
In a response to a Cyprus Business Mail questionnaire early July, emailed through a former FBME colleague, Khachatryan, described the reference to the alleged MBA degree by Hogan Lovells as “an error, which was swiftly corrected in the following submission to FinCEN”.
A CBC spokesperson confirmed that Khachatryan served as compliance officer at FBME from 2011 onwards but declined to comment on her qualifications citing data protection.
The bank, which had an obligation to scrutinise the people they hired in key positions as part of standard due diligence in order to protect investors and depositors, allowed Khachatryan to remain in her position until 2016.