The Swiss side: FINMA, country manuals and the FinSA

FINMA's position of October 2010

Swiss supervisory law does not leave the compliance of Swiss banks with foreign law to the foreign state. On 22 October 2010, in the aftermath of the American proceedings against UBS, FINMA published a position paper on the legal and reputational risks of cross-border financial services. It required supervised institutions to subject their existing cross-border business to an in-depth analysis of the legal framework and the associated risks, to define a compliant service model for each target market, and to ensure that all risks, including legal and reputational risks, were adequately identified, limited and monitored. FINMA announced that it would verify more frequently how supervised institutions handled these risks.¹ The paper was addressed above all to wealth management banks and insurers serving foreign private clients, which in Lugano meant the whole of the banking sector.

The legal basis of FINMA's expectations lies in Article 3 BankA, which makes the banking licence conditional on an organization appropriate to the bank's business and on the permanent guarantee of proper business conduct (Gewähr für eine einwandfreie Geschäftstätigkeit). The position paper drew from this provision the duty to capture, limit and monitor risks across all operations, including cross-border business. It mentioned that the staff must be trained in what was permitted in each target country, that compliance had to be monitored and breaches sanctioned. It warned that frequent cross-border activity and the repeated physical presence of a bank's representatives in a foreign country could create foreign tax obligations and conflicts with foreign law.² The paper did not create new rules. It applied the existing licensing conditions to a risk that the banks had long neglected.

The consequence is that a breach of Italian market access rules is also a Swiss supervisory issue. A bank whose relationship managers solicit Italian clients in Italy without authorization violates Italian law, but it also fails to manage a legal and reputational risk that FINMA expects it to control. In serious cases FINMA can open enforcement proceedings, order the bank to restore compliance, confiscate profits and impose industry bans on the responsible individuals. The supervisory cooperation agreed with CONSOB and the Banca d'Italia in 2023 makes it more likely that FINMA learns of such cases.³

Country manuals and service models

The banks translated FINMA's expectations into internal rules that are known in practice as country manuals or country guidelines (Länderhandbücher, manuali paese). A country manual describes, for each country in which the bank has clients, what the bank and its employees may and may not do. For Italy a typical manual distinguishes between activities permitted from Switzerland and activities requiring the Italian branch or a partner institution. It lists the forms of communication allowed with existing clients, such as replies to client requests, the sending of account statements and the execution of instructions received. It prohibits unsolicited contact with prospective clients, the distribution of marketing material on products not requested and the presentation of new categories of services. It also sets rules for documenting the client's initiative.⁴

Country manuals are supplemented by service models that assign clients to booking centres and channels. A Lugano bank belonging to a group with an Italian branch can offer a client the choice between a relationship booked in Switzerland and served passively and a relationship with the Italian branch, which may be served actively in Italy. Some groups have created such dual structures specifically for Italian clients. For banks without an Italian presence, the service model is limited to the passive relationship. In both cases the manual draws the line that the relationship manager must not cross. The test of a bank's cross-border compliance comes when a valuable client asks for a meeting in Milan and the manual must be applied against the wishes of both the client and the relationship manager.

Notes

1. FINMA, "Posizione della FINMA sui rischi nelle operazioni transfrontaliere aventi per oggetto prestazioni finanziarie", press release, 22 October 2010, https://www.finma.ch/it/news/2010/10/mm-finma-positionspapier-rechtsrisiken-20101022/. ↩
2. FINMA, Positionspapier Rechts- und Reputationsrisiken im grenzüberschreitenden Finanzdienstleistungsgeschäft, 22 October 2010, https://cdbf.ch/wp-content/uploads/2021/12/diskussionspapier-20101022-rechts-reputationsrisiken-grenzueberschr-geschaeft.pdf ("Das Personal ist entsprechend zu schulen"). ↩
3. Federal Act of 22 June 2007 on the Swiss Financial Market Supervisory Authority (FINMASA), SR 956.1, Art. 31 (restoration of compliance with the law), Art. 33 (prohibition from practising a profession) and Art. 35 (confiscation), https://www.droit-bilingue.ch/en-de/9/95/956.1-index.html. On the 2023 memorandum see FINMA press release of 16 August 2023 (above). ↩
4. FINMA, position paper of 22 October 2010 (above), which requires "Weisungen über die in den Zielländern (un)erlaubten Geschäftsaktivitäten" and country-specific expertise, and mentions client visits on site ("Kundenbesuche vor Ort"). Individual country manuals are internal and unpublished; the description of their typical content follows these requirements. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.