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Dear reader, in this publication we will discuss the requirements set by FINMA (Swiss Financial Market Supervisory Authority) for obtaining a FinTech license, as well as provide information about the supervisory authority and FinTech activities. After reading this publication, you will have an understanding of what is needed to obtain a FinTech license in Switzerland and how much time it will take, as well as an approximate cost of obtaining such a license. You will also have an idea of what challenges you might face in obtaining the license and the subsequent operation of the company.
So, what is FINMA (Swiss Financial Market Supervisory Authority)? It is the authority that regulates the financial market in Switzerland, which in Russian is called “Управление надзора за операциями финансового рынка Швейцарии” (Financial Market Supervisory Authority of Switzerland). It also oversees all areas of finance, including banks and insurance companies, exchanges and securities markets, as well as collective investment schemes and auditing firms.
The authority is a public law institution with its own legal personality, headquartered in Bern, with another office in Zurich. It is institutionally, functionally, and financially independent from the central federal administration and only administratively connected to the Federal Department of Finance. Parliament has supervisory control.
FINMA began its operations on January 1, 2009. It resulted from the merger of the Swiss Federal Banking Commission (SFBC), the Federal Office of Private Insurance (FOPI), and the Anti-Money Laundering Control Office (Kst GwG). The Financial Market Supervisory Act (FINMAG), adopted on June 22, 2007, by the Federal Council, and on October 15, 2008, the Federal Council adopted the implementation ordinance.
The authority has organizational and budgetary autonomy. Its governing bodies are the board of directors and management, which is divided into four areas: banks, insurance companies, markets, and strategic funds and central services.
According to financial market laws, the authority aims to protect creditors and investors, as well as insured persons (investor protection). It approves and oversees the activities of companies and organizations under its control. It is fully responsible for combating money laundering and, if necessary, conducts all reorganization and bankruptcy procedures.
The regulator has two main goals and one secondary goal:
The first goal is to protect creditors and investors, as well as insured persons (client protection).
The second main goal is to protect the functionality of financial markets. This functional protection includes the stability of the financial system, market functioning, trust in the financial system, or protecting the financial system from misuse by criminals.
Pursuing these goals, the supervisory authority should contribute to strengthening the reputation and competitiveness of the Swiss financial center (secondary goal).
In 2018, FINMA’s gross income was 130.554 million Swiss francs. FINMA’s expenses are covered by fees and supervisory charges from regulated organizations, which must pay them. Fees are charged individually to each regulated entity. On the other hand, supervisory charges relate to the supervisory group. The supervisory efforts made are distributed as necessary and appropriately among various supervisory areas. FINMA covers about 80 percent of operational expenses, including legal reserve allocations, with about one-fifth covered by commission income.
FINMA invests about two-thirds of its funds into core tasks of licensing, monitoring, compliance, and regulation, of which 65 percent was spent on monitoring in 2018.
According to FINMA, the licensing process for FinTech usually takes about 6 months, but the actual duration will depend on the quality and complexity of the Application. Also, depending on the client, preparing the License Application typically takes from 2 to 3 months.
We base our fee on the time spent on the project. Working hours are billed at a blended hourly rate in Swiss francs for all lawyers working on the matter. The total fee for our services in obtaining a FinTech license usually amounts to up to 90,000 Swiss francs. The final amount will depend, among other things, on the complexity of the client’s business model, client availability, the quality of documents provided by the client, etc. Additionally, FINMA will charge fees based on the time required to process the client’s application and the applicable hourly rate, which typically ranges from 15,000 to 30,000 Swiss francs.
As you can see, the conditions are quite acceptable with relatively short timelines for obtaining the license and a reasonably priced service. The only point we would pay more attention to is the fact that “time is money,” meaning, before submitting the application for the license, it is necessary to prepare thoroughly and to complete the application as accurately as possible, as the longer it remains with the regulatory authority, the more you will have to pay for its processing.
We recommend our clients to thoroughly work out all aspects of their activities, to complete and fill out the application as detailed as possible, and to address as many additional questions from FINMA as possible to save time in the future.
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