The club have since confirmed they will appeal the decision at the Court of Arbitration for Sport (CAS).
Former Arsenal boss Wenger is in favour of capping finances but believes further work is needed to ensure there can be no questioning the legality of certain actions.
However, he was in no doubt that clubs deemed to have contravened the regulations deserve punishment.
"I was always for control of the financial rules. Let the clubs work with the natural income they have," said Wenger, who now works for FIFA as its chief of global football development.
"I'm convinced that there is an evolution to be made in the way the rules are at the moment. But they are what they are and you have to respect them.
"People who don't respect them and are caught trying to get around the rules in more or less legal ways have to be punished. If it's proven that this has been done on purpose then this cannot go unpunished.
"Sport is about winning by respecting the rules. If there's no respect for the rules, it's not real sport, which is what I think is most important."
The ban imposed by UEFA has led to speculation over the future of some of City's star players, as well as coach Pep Guardiola.
However, Guardiola has reportedly told the players he will remain at the club regardless of the outcome of the appeal to CAS.