Federal Administrative Court reaffirms limits on enforcement powers

1. Judgment B-5862/2024 of June 16, 2026

In a recent decision, the Swiss Federal Administrative Court has upheld an appeal of a bank (represented by Homburger) against a FINMA enforcement decision concerning alleged anti-money laundering deficiencies. FINMA had ordered a broad enforcement package, including disgorgement, governance and compliance measures, and a prohibition on opening certain business relationships. The Court set aside the disgorgement order and the substantive measures, concluding that FINMA had not sufficiently shown a material breach of supervisory law and failed to demonstrate that the remedial measures were necessary and proportionate.

The judgment is a reminder that FINMA enforcement is powerful, but not boundless. FINMA must act on a legal basis, establish the relevant facts with precision, prove a serious and causally profit-generating breach of supervisory law where disgorgement is ordered, and tailor remedial measures to what is necessary and proportionate. The Court also cautioned against enforcement by hindsight. Later geopolitical developments, sanctions measures, or adverse information do not define what an institution should have recognized years earlier. The relevant perspective remains the one at the time of the conduct – and, for remedial measures, the institution’s actual situation at the time of FINMA’s decision.

2. Key Points of the Decision

The relevance of the judgment lies in the Court’s reaffirmation of principles that have always applied but, in recent enforcement practice, have at times receded behind a broad understanding of FINMA’s supervisory discretion. In particular, the Court held the following:

• Disgorgement requires a concrete link between breach and profit. Swiss law allows FINMA to disgorge profits generated through a material breach of supervisory provisions. The Court emphasized that this requires more than identifying weaknesses in a compliance file. FINMA must establish the relevant supervisory breach, its materiality, and a causal link between that breach and the specific profit to be disgorged. The Court’s conclusions establish a much-needed limit to FINMA’s recent tendency toward what can only be described as the disgorgement of revenues loosely connected to, but not causally generated by, breaches of supervisory rules.
• The limitation period starts with the breach. Swiss law provides that FINMA’s right to order disgorgement becomes time-barred after seven years. The Court held that this period generally begins when the relevant supervisory duty is breached. It does not restart each time the institution later earns fees or other income from a relationship. FINMA therefore cannot revive time-barred conduct by pointing to profits generated at a later stage.
• FINMA must assess conduct from an ex ante The Court cautioned against judging earlier conduct through the lens of later developments. The fact that a relationship appears higher-risk today does not automatically mean that the bank should have reached the same conclusion years earlier. The decisive question is what the institution knew or should have known at the relevant time, under the rules and information then available.
• FINMA must take remediation into account. Before FINMA opened its enforcement proceedings, the bank had already adopted new standards, reviewed the relevant client relationships, strengthened its compliance framework, and taken further corrective measures. In light of these steps, the Court found that the additional remedial measures ordered by FINMA were not sufficiently justified and therefore disproportionate. Where an institution has independently identified weaknesses and taken credible steps to address them, FINMA must explain why further measures remain necessary despite that remediation.
• Internal bank rules are not supervisory provisions. FINMA had relied, among other things, on alleged breaches of the bank’s internal compliance manual. The Court reaffirmed that internal policies do not qualify as supervisory provisions within the meaning of Article 35 FINMASA. They may be relevant to assessing an institution’s organization, risk culture, or control environment. But a breach of internal rules cannot, on its own, establish the material breach of supervisory law required for disgorgement.

The judgment is not yet final. It remains to be hoped that, on any appeal and in future case law, its central message will endure: FINMA’s enforcement powers are broad, but serious enforcement consequences require legal certainty, evidentiary discipline, fairness and proportionality, and an ex ante assessment of the facts instead of hindsight bias.