It happens exactly as you suspect, by arm twisting in secret.
I can tell you in some detail how Canada did some of its own arm twisting against the United States!
Some years ago, Charles Schwab & Company (a major US brokerage) had to close all the accounts of Canadian customers who had accounts in the US.
Charles Schwab & Company is a wholly-owned subsidiary of the Schwab Corporation that trades on the NYSE. Schwab Canada was a subsidiary of the Schwab Corporation. There was no other relation between Schwab Canada and Charles Schwab & Company.
When the Schwab Corporation sold off Schwab Canada (their Canadian broker/dealer) to a Canadian company, the Canadian government said that Schwab's US operations had these these choices:
(a) get a Canadian license; Canadian laws says that they cannot solicit Canadian business unless they open a branch in Canada, or
(b) transfer all Canadian clients to their Canadian broker/dealer before they sold it, or
(c) face a $2,000,000 fine for doing business without a license; the Canadian government's threatened fine is against the parent company (the Schwab Corporation)
Notice that the Canadian government feels free to punish and give orders to the entirely US-based company (Charles Schwab & Company) and to the parent company (Schwab Corporation) because the Canadian government doesn't want it citizens to maintain accounts in the US.
Schwab kept holding off for 2 years on doing anything, but finally the Canadian government threatened to start fining them.
There were 1400 Canadian customers who had their US-based accounts closed. Merrill Lynch (an even bigger US brokerage) had a lot more US-based Canadian accounts than Schwab, and the same thing happened to them as well.
So even though foreign countries should have no jurisdiction over what a country does internally, they actually do because deals get blocked and secret pressure is applied.
I can tell you in some detail how Canada did some of its own arm twisting against the United States!
Some years ago, Charles Schwab & Company (a major US brokerage) had to close all the accounts of Canadian customers who had accounts in the US.
Charles Schwab & Company is a wholly-owned subsidiary of the Schwab Corporation that trades on the NYSE. Schwab Canada was a subsidiary of the Schwab Corporation. There was no other relation between Schwab Canada and Charles Schwab & Company.
When the Schwab Corporation sold off Schwab Canada (their Canadian broker/dealer) to a Canadian company, the Canadian government said that Schwab's US operations had these these choices:
(a) get a Canadian license; Canadian laws says that they cannot solicit Canadian business unless they open a branch in Canada, or
(b) transfer all Canadian clients to their Canadian broker/dealer before they sold it, or
(c) face a $2,000,000 fine for doing business without a license; the Canadian government's threatened fine is against the parent company (the Schwab Corporation)
Notice that the Canadian government feels free to punish and give orders to the entirely US-based company (Charles Schwab & Company) and to the parent company (Schwab Corporation) because the Canadian government doesn't want it citizens to maintain accounts in the US.
Schwab kept holding off for 2 years on doing anything, but finally the Canadian government threatened to start fining them.
There were 1400 Canadian customers who had their US-based accounts closed. Merrill Lynch (an even bigger US brokerage) had a lot more US-based Canadian accounts than Schwab, and the same thing happened to them as well.
So even though foreign countries should have no jurisdiction over what a country does internally, they actually do because deals get blocked and secret pressure is applied.