FINMA Enforcement Actions: Powers, Procedures, and Precedents

FINMA’s enforcement powers are a critical element of the Swiss financial regulatory framework. The authority’s ability to investigate, sanction, and remediate breaches of financial market law underpins the credibility of Swiss regulation and the integrity of the financial centre. Understanding FINMA’s enforcement approach is essential for regulated institutions, their boards and management, and advisors operating in the Swiss market.

Overview

FINMA exercises enforcement powers under the Financial Market Supervision Act (FINMASA) and the sector-specific laws it administers, including the Banking Act, the Insurance Supervision Act, the Financial Institutions Act, the Financial Services Act, and the Anti-Money Laundering Act.

FINMA’s enforcement activities span a spectrum from supervisory measures — corrective actions taken within the ongoing supervisory relationship — to formal enforcement proceedings that may result in significant sanctions. The authority describes its approach as risk-based and proportionate, focusing enforcement resources on the most serious threats to market integrity, financial stability, and client protection.

Enforcement Powers

Supervisory Measures

FINMA’s most frequently used powers are supervisory measures taken within the ongoing supervisory process. These include:

Declaratory rulings. Formal determinations that a specific situation constitutes a breach of regulatory requirements, serving as a basis for corrective action.

Orders to restore lawful conditions. Directives requiring supervised institutions to remedy identified deficiencies within specified timeframes.

Restrictions on business activities. Orders limiting or prohibiting specific activities pending remediation of regulatory concerns.

Appointment of an investigating agent. The appointment of an independent expert to investigate specific matters and report findings to FINMA.

Formal Enforcement Proceedings

For more serious breaches, FINMA conducts formal enforcement proceedings that may result in:

Industry ban. FINMA can prohibit individuals from practising in the financial industry for a period of up to five years. This is one of FINMA’s most significant enforcement tools, as it directly affects the career and livelihood of the individual concerned.

Disgorgement of profits. FINMA can order the confiscation of profits derived from breaches of financial market law.

Publication of enforcement decisions. FINMA may publish its enforcement decisions, naming the institution or individual concerned. This “naming and shaming” power carries significant reputational consequences and serves as a deterrent.

Licence revocation. The ultimate supervisory sanction — revocation of a financial institution’s licence to operate. This power is exercised only in the most serious cases, typically where the institution is no longer able to meet the conditions for licensing.

Liquidation. In cases where a licensed institution is no longer viable, FINMA may order its liquidation and appoint a liquidator.

Unauthorised Activity

A significant portion of FINMA’s enforcement activity addresses unauthorised financial market activity — individuals or entities conducting banking, securities dealing, insurance, or other regulated activities without the required licence. FINMA maintains an active programme to identify and act against unauthorised operators, frequently publishing warnings to the public about such entities.

Investigation Procedures

Detection

FINMA identifies potential enforcement matters through several channels:

• Ongoing supervisory monitoring and regulatory reporting analysis
• Referrals from regulatory audit firms
• Whistleblower reports and complaints from the public
• Information sharing with other domestic and international authorities
• Market surveillance and media monitoring

Investigation

When FINMA identifies a potential breach, it may conduct an investigation using its statutory powers:

Information requests. FINMA can require supervised institutions and their employees to provide information and documents.

On-site inspections. FINMA has the power to conduct on-site inspections of supervised institutions’ premises and records.

Appointment of investigating agents. For complex matters, FINMA may appoint independent investigating agents — typically law firms or audit firms — to conduct detailed examinations and report findings.

Cooperation with criminal authorities. Where potential criminal offences are identified, FINMA cooperates with the Office of the Attorney General of Switzerland (OAG) and cantonal prosecutors. FINMA itself does not have criminal prosecution powers.

Due Process

Enforcement proceedings are subject to due process requirements under Swiss administrative law. Affected parties have the right to be heard, to access the case file, and to challenge FINMA’s decisions before the Federal Administrative Court and, ultimately, the Federal Supreme Court.

FINMA must base its enforcement decisions on evidence and apply the principle of proportionality — ensuring that the severity of the sanction is commensurate with the gravity of the breach.

Key Enforcement Areas

Anti-Money Laundering

AML compliance is one of FINMA’s most active enforcement domains. FINMA has brought numerous enforcement actions against banks and other financial intermediaries for failures in customer due diligence, transaction monitoring, and suspicious activity reporting. These actions have resulted in industry bans for responsible individuals, orders to strengthen compliance frameworks, and — in some cases — licence revocations.

The importance of robust AML compliance cannot be overstated in the Swiss regulatory context. FINMA has consistently signalled that AML failures will be pursued vigorously, regardless of the size or reputation of the institution involved.

Market Conduct

FINMA investigates and sanctions breaches of market conduct rules, including insider trading, market manipulation, and disclosure violations. Whilst criminal prosecution of market abuse is the responsibility of the OAG, FINMA exercises supervisory powers to address market conduct failures and may impose industry bans and other sanctions.

Corporate Governance

FINMA has taken enforcement action against institutions and individuals for governance failures, including inadequate risk management, conflicts of interest, and breaches of duty by board members and senior managers. The authority’s focus on governance reflects its view that effective governance is the foundation of sound financial institution management.

Cross-Border Activities

FINMA has addressed enforcement actions to institutions that conducted cross-border financial activities in violation of foreign regulatory requirements or Swiss rules on cross-border services. This area has become increasingly important as FINMA seeks to manage the reputational and legal risks arising from Swiss institutions’ international activities.

International Cooperation

FINMA cooperates extensively with foreign regulatory and supervisory authorities in enforcement matters. Cooperation is facilitated by:

Multilateral memoranda of understanding through IOSCO and IAIS.

Bilateral agreements with individual regulatory authorities.

Supervisory colleges for internationally active financial groups.

International cooperation enables FINMA to obtain evidence, coordinate enforcement actions, and share information with foreign authorities in cases involving cross-border conduct.

Trends and Developments

Several trends are shaping FINMA’s enforcement approach:

Increased individual accountability. FINMA is placing greater emphasis on the accountability of individual board members and senior managers for compliance failures, using industry bans and other individual sanctions more actively.

Technology-related enforcement. As the financial sector digitalises, FINMA is developing enforcement capabilities related to cyber security failures, technology risk management deficiencies, and unauthorised digital financial services.

Transparency. FINMA has increased the transparency of its enforcement activities, publishing more detailed information about enforcement decisions and their rationale.

Proportionality. Whilst maintaining a firm enforcement stance, FINMA has sought to apply sanctions proportionately, distinguishing between systemic failures and isolated incidents, and between deliberate misconduct and inadvertent non-compliance.

For regulated institutions, the clear message is that proactive compliance — supported by robust governance, effective risk management, and a strong compliance culture — is the most effective means of avoiding enforcement action. When issues arise, early self-identification, prompt remediation, and transparent communication with FINMA are factors that the authority considers in determining the appropriate supervisory response.

Donovan Vanderbilt is a contributing editor at ZUG FINANCE, the Swiss private banking and fintech intelligence publication of The Vanderbilt Portfolio AG, Zurich. He covers wealth management, institutional finance, and regulatory affairs across the Swiss financial centre.