The global financial crimes watchdog has placed the United Arab Emirates on its gray list, dealing a blow to the Middle East’s top financial and commercial hub.

The Paris-based Financial Action Task Force (FATF) said in a report on Friday that it had added the oil-rich Gulf state to other nations “subject to heightened scrutiny”, placing the Arab Emirates united on a list of 22 other nations including Syria. , Albania, Panama and South Sudan.

The FATF said the UAE had made a “high-level commitment to work with the Anti-Money Laundering and Anti-Terrorist Financing Watchdog and had made ‘significant improvements’ to improve its systems. .

But the gray list will damage the reputation of the Gulf state, which has long boasted of being the destination of choice for international banks and multinational corporations operating in the Middle East.

The United Arab Emirates, and Dubai in particular, have long earned a reputation for facilitating the transfer of large sums of money to and from the country and for exercising lax control in areas such as real estate transactions.

Being on the FATF watch list should not deter financial institutions seeking to establish themselves in the UAE, Gulf-based bankers have previously said. But reputational damage could increase costs for local banks doing business with global counterparts and complicate compliance issues for international lenders.

In 2020, the FATF said the limited number of money laundering prosecutions by the UAE, particularly in Dubai, was a “concern” and urged the country to strengthen its anti-money laundering measures. money.

Ahead of the report, Emirati officials said the UAE had taken numerous steps to address FATF concerns and significantly increased authorities’ ability to crack down on ‘dirty money’ flows across the federation’s seven emirates. .

This has included the creation of a corporate beneficial ownership register that can provide requested information to international counterparties in just three days. The UAE has also signed extradition agreements with 33 countries, including the UK, India and China.

Sectors prone to financial abuse, such as real estate, have been brought under the umbrella of the federally run anti-money laundering reporting system.

The UAE’s Executive Office for Combating Money Laundering and Terrorist Financing said on Friday evening after the report was released that the Gulf state is taking “its role in protecting the integrity of the financial system world extremely seriously”.

She added in a statement that she would work closely with the FATF “to quickly address identified areas for improvement.”

“Building on this, the UAE will pursue its ongoing efforts to identify, disrupt and punish criminals and illicit financial networks in accordance with FATF findings and the UAE National Action Plan, as well as in close coordination with our international partners.” , he added. noted.

The FATF said that as part of an action plan, the UAE is to provide additional resources to its Financial Intelligence Unit to strengthen its analytical function and its ability to pursue money laundering threats. high risk; demonstrate a sustained increase in the number of effective investigations and prosecutions of different types of money laundering; and proactively identify and address non-compliance with sanctions.