Strong Claims, Small Numbers, Are FINMA AML Penalties Enough?

finma aml failures small penalties leonteq hsbc

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An exclusive article by Fred Kahn

Swiss supervision has long projected an image of precision, discipline, and legal rigor. Yet a closer look at enforcement shows a consistent paradox. Financial institutions can commit serious anti-money laundering breaches, fail to monitor high-risk clients for years, or profit from opaque distribution channels, and still face outcomes that feel restrained compared to the failures described. The Swiss regulator, FINMA, regularly identifies grave deficiencies but relies on a toolkit centered on disgorgement, operational restrictions, and mandated remediation.

FINMA AML penalties and the structural limits of deterrence

Under Swiss law, FINMA cannot impose corporate fines. Its power extends to confiscating unlawfully generated profits, ordering business restrictions, appointing audit agents, and banning individuals from the industry. This statutory limitation naturally caps the “headline” number and channels enforcement outcomes into corrective, rather than punitive, territory.

Having said this, there is a visible pattern across nearly every major AML case of recent years. Supervisory decisions sound firm and detailed, but the resulting measures—profit confiscations in the single or low double-digit millions, onboarding bans, audit mandates—rarely change the calculus for large banks. For cross-border institutions with billions under management, such sums and restrictions are operational challenges rather than existential threats. The credibility gap that follows does not come from a lack of effort or diligence by FINMA, but from the design of the system itself.

Still, the question remains whether Switzerland’s emphasis on proportionate remediation over punishment can achieve credible deterrence in an era of global alignment, data-driven investigations, and increasingly complex laundering techniques. The following sections unpack this dynamic through a structured examination of emblematic cases, the legal framework shaping outcomes, and the few rare moments when Swiss enforcement delivered an unusually hard stance.

How FINMA’s structure shapes the Swiss enforcement profile

The lightness of Swiss AML outcomes is not a mystery of discretion but a consequence of law. FINMA’s powers are defined in the Financial Market Supervision Act (FINMASA), which authorizes the regulator to confiscate profits or losses avoided through violations but does not authorize administrative corporate fines. Its enforcement model is therefore restorative, not punitive. The regulator can order structural and operational measures, require independent monitors, publish rulings, and, in extreme cases, revoke licenses. It can also open individual proceedings that lead to bans or fit-and-proper disqualifications. Each of these levers has value, but none produces the kind of public, financial deterrent that global peers deploy through civil penalties.

To compensate, FINMA uses a variety of measures that create operational and reputational cost even without formal fines. These include temporary prohibitions on onboarding high-risk clients or distributors, mandatory external reviews, the obligation to revalidate thousands of client files under supervisory oversight, capital surcharges tied to control weaknesses, and the publication of enforcement findings that remain on FINMA’s website for years. For smaller institutions, these tools can be devastating. For large cross-border groups, they are often absorbed as process expenses.

The regulator’s philosophy reflects Switzerland’s financial identity. As a cross-border wealth hub, it values predictability, stability, and legal precision. Excessive punitive powers are viewed as potential risks to the credibility of the jurisdiction and its attractiveness to international finance. This equilibrium has advantages: the supervisory process is transparent, and enforcement rarely feels arbitrary. But it also produces the recurring perception that Switzerland corrects rather than punishes, and that even repeat AML failures can be managed within a predictable remediation envelope.

Case-by-case analysis of Swiss AML enforcement patterns

Each case below is structured to highlight what FINMA found, the outcome, and why observers often regard the result as light compared to international standards.

Leonteq and the limits of Swiss enforcement

Leonteq’s 2024 case offers an ideal entry point. The company, a listed structured-products provider with cross-border reach, was found to have committed serious breaches of regulatory law, including AML-relevant failings linked to its indirect distribution model and relationships with unregulated distributors. FINMA’s ruling led to a CHF 9.3 million profit disgorgement, the appointment of an external audit mandatary, and restrictions on onboarding new high-risk distributors until compliance was restored. No corporate fine was imposed, and no public individual bans were issued.

For many AML professionals, the case illustrates Switzerland’s structural ceiling on punishment. The findings themselves acknowledged systemic weaknesses in risk management and oversight. The remediation plan, though operationally demanding, is reversible once compliance functions are restructured. The monetary element—CHF 9.3 million—is immaterial to a listed financial group. What emerges is a model where deterrence is achieved through process burden, not financial pain.

The “systemic risk” rationale sometimes invoked to justify restrained outcomes also appears weak here. Leonteq is not systemically important in Switzerland. Its failure would not threaten financial stability. Yet the treatment remains conservative, reflecting FINMA’s institutional philosophy: to stabilize first, correct second, and punish last, if at all. The case epitomizes the regulator’s belief that reputational risk and ongoing supervisory pressure can achieve deterrence without high-profile fines. Whether that assumption still holds in a global compliance market that measures accountability in monetary terms is open to debate.

Mirabaud & Cie SA (2024)

What FINMA found: Serious violations of financial-market law and AML obligations related to high-risk relationships and deficiencies in transaction monitoring.
Outcome: CHF 12.7 million confiscation of unlawfully generated profits, three individual proceedings, and restrictions on onboarding new high-risk clients until compliance improved.
Why it looks light: The exposure involved clients with billions in assets under management. For an institution of that size, the confiscation, while not trivial, represents a small fraction of revenue. The core consequence remains process rebuilding, not direct financial penalty.

Julius Baer (2024/2025 follow-up)

What FINMA found: Serious AML failings across high-risk relationships and legacy clients from 2009 to 2019, following earlier actions connected to PDVSA and FIFA-linked accounts.
Outcome: Over CHF 4 million in total (approximately CHF 3 million disgorgement plus costs), with additional governance measures and a long-term remediation plan.
Why it looks light: The figure contrasts sharply with a related enforcement in another jurisdiction, where the UK regulator imposed a penalty exceeding £18 million for comparable integrity and systems failures. The disparity highlights how structural limitations, not necessarily supervisory philosophy, drive Switzerland’s softer optics.

Julius Baer baseline (2020)

What FINMA found: Serious AML failings between 2009 and 2018 tied to high-risk networks.
Outcome: Program overhaul and governance measures, without a major financial penalty.
Why it looks light: The gravity of the failings was significant, but the absence of a fine reaffirmed that Switzerland’s enforcement is designed around restoration, not punishment.

Coutts (2017, 1MDB)

What FINMA found: Major AML lapses in the handling of 1MDB-related funds.
Outcome: CHF 6.5 million disgorgement and a series of remedial measures.
Why it looks light: The 1MDB scandal was global, involving billions in laundered funds. The Swiss outcome, though legally consistent, appeared minor relative to the scope of misconduct elsewhere.

J.P. Morgan (Switzerland) Ltd (2017, 1MDB perimeter)

What FINMA found: Serious shortcomings in AML controls linked to 1MDB transactions.
Outcome: No monetary penalties or business restrictions; FINMA cited cooperation and did not pursue individual sanctions.
Why it looks light: The explicit absence of any penalty or restriction despite “serious shortcomings” reinforced perceptions of a low-intensity approach to enforcement. A later criminal fine from the Attorney General’s Office underscored how different the supervisory and prosecutorial toolkits remain.

Banque Audi (Suisse) SA (2024)

What FINMA found: Serious AML violations, particularly around politically exposed persons.
Outcome: CHF 3.9 million disgorgement and a CHF 19 million capital surcharge.
Why it looks light: The capital surcharge is substantial in relative terms, but the direct confiscation remains modest. The case shows how FINMA uses balance sheet mechanisms to compensate for the absence of formal fines.

HSBC Private Bank (Suisse) (2024)

What FINMA found: Breaches in AML obligations related to high-risk politically exposed person accounts, involving large value flows over several years.
Outcome: Business restrictions, appointment of an audit mandatary, and a comprehensive review of the high-risk client book.
Why it looks light: Despite hundreds of millions in transactions, the outcome emphasized oversight rather than financial consequence. The measures were technically sound but lacked punitive weight.
The pattern across these cases is clear. Each involved serious, often repeated failures. Each ended with confiscation and operational constraints rather than severe financial penalties. The result is a consistent enforcement rhythm that prioritizes correction, documentation, and structural repair over deterrence through cost.

Cases where FINMA took a harder stance

Not all Swiss enforcement is mild. In rare instances, FINMA has deployed its powers to maximum effect. The most notable examples are BSI and Falcon, both connected to 1MDB.

BSI’s case remains a milestone. FINMA identified pervasive AML failures, weak governance, and misconduct intertwined with global money laundering operations. The regulator imposed an unprecedented confiscation initially set at CHF 95 million, later recalculated by the courts to CHF 70 million, and issued industry bans for several individuals. Though the number still pales compared to foreign penalties, it remains one of the largest ever in Switzerland.

Falcon’s case went even further through coordination with foreign regulators. While FINMA imposed restrictions and ordered extensive remediation, the decisive blow came from abroad: the institution’s foreign license was revoked. The combined effect effectively ended Falcon’s existence. This cross-border amplification shows how collaboration can produce deterrence that Switzerland’s domestic framework alone cannot achieve.

These examples demonstrate that FINMA can act firmly when the facts are overwhelming or when foreign coordination elevates the stakes. The challenge is not the absence of capability but the rarity of its full deployment. Most modern Swiss AML cases operate within a narrower, safer band of proportionality.

Why Swiss outcomes keep landing this way

The recurring softness of Swiss AML outcomes has four main drivers.

First, the law defines the ceiling. FINMA cannot impose corporate fines. Its power stops at profit confiscation, and any higher sanction must come from the criminal system. This design reflects a deliberate separation of administrative supervision and penal enforcement, protecting legal proportionality but constraining deterrence.

Second, the supervisory philosophy favors remediation. FINMA views enforcement as a tool to restore sound business conduct, not to punish. Its playbook focuses on program upgrades, governance reforms, and targeted restrictions. This approach aligns with Swiss prudence but struggles to send the same message of accountability that large monetary penalties convey abroad.

Third, individual accountability is inconsistent. FINMA can issue industry bans, but they are rare and often anonymized. Without public consequences for decision-makers, the deterrent effect is muted. The focus on institutional remediation over personal accountability keeps enforcement outcomes technical rather than cultural.

Fourth, Switzerland’s financial architecture depends on stability. The country hosts a vast wealth management sector, employs thousands in financial services, and prizes legal predictability. Regulators consciously avoid measures that could trigger market instability or reputational shock. While prudent, this balance often favors continuity over demonstration.

Even with these constraints, FINMA has tools that could raise deterrence without breaking its legal limits. More robust capital surcharges, prolonged onboarding bans, mandatory public statements of fact detailing root causes, and coordinated timing with foreign regulators can all sharpen enforcement optics. Visibility and predictability are deterrence levers as powerful as money if applied consistently.

What could make Swiss enforcement more credible

Switzerland does not need to change its law to make AML enforcement more persuasive. It needs to optimize the instruments already available. Several concrete shifts could strengthen credibility.

One, expand narrative depth in public rulings. Publishing detailed facts, timelines, and escalation failures would replace speculation with transparency. When supervisory findings read like thorough forensic analyses, reputational risk becomes a penalty in itself.

Two, standardize “recidivism uplifts.” When an institution repeats similar AML deficiencies across cycles, the next enforcement should automatically escalate consequences—through longer business prohibitions, higher capital surcharges, or extended audit mandates. Predictable escalation embeds deterrence into supervisory logic.

Three, enforce visible individual accountability. Senior managers, control officers, and board members responsible for oversight should face fit-and-proper consequences when their institutions repeatedly fail AML obligations. Visibility matters more than volume; even a few public bans per year would change behavior across the market.

Four, coordinate with foreign authorities on selected cases. Joint announcements, synchronized remedies, and aligned rationales reduce the incentive for penalty shopping. They also reinforce Switzerland’s global alignment narrative, showing that cooperation can overcome domestic legal limits.

Five, use capital requirements more dynamically. Tying capital add-ons to AML control failures translates weaknesses into tangible cost, directly affecting shareholder returns. It also avoids the legal obstacles associated with fines while increasing accountability where it counts—the balance sheet.

Six, expand the use of public naming and thematic reports. By publishing aggregated data on recurring deficiencies, average remediation times, and the share of actions targeting systemic institutions, FINMA could show tangible progress while keeping confidentiality intact.

Finally, tie governance to incentives. Institutions should demonstrate that compensation, malus, and clawback policies are triggered when AML control breakdowns occur. Supervisors can request proof of activation during inspections, ensuring that internal incentives align with compliance expectations.

Through these measures, Switzerland could preserve its stability-oriented model while improving deterrence credibility. The aim is not to mimic foreign regulators but to modernize Swiss enforcement within its legal DNA—turning transparency, repetition control, and individual accountability into meaningful deterrents.

Some of FinCrime Central’s articles may have been enriched or edited with the help of AI tools. It may contain unintentional errors.

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Strong Claims, Small Numbers, Are FINMA AML Penalties Enough?

Table of Contents

FINMA AML penalties and the structural limits of deterrence

How FINMA’s structure shapes the Swiss enforcement profile