The Paris-based Financial Action Task Force (FATF) has added the UAE to the list of countries subject to increased monitoring due to high prevalence of money laundering activities.

In a statement published on its website, FATF said the decision to place the UAE on the “grey list” was taken due to “deficiencies in countering money laundering, terrorist financing, and proliferation financing.”

The United Arab Emirates has entered the FATF’s Jurisdictions under Increased Monitoring list, often referred to as the 'grey list', following the conclusion of the FATF Plenary. See the full update here➡️https://t.co/cuEK8iKyJY #FollowTheMoney pic.twitter.com/u6gVWHUKJo

— FATF (@FATFNews) March 4, 2022

The financial watchdog urged Abu Dhabi to show more commitment to investigating suspected money laundering cases, identifying and reporting suspicious transactions in its jurisdiction and closing loopholes in certain sectors, such as real estate and precious metals trading.

Dubai, the commercial hub of the UAE, has for a long time been a magnet for corrupt and criminal individuals from around the world.

Opaque business practices and loopholes in the legal framework have created an ideal environment for these individuals to operate within the UAE and to launder the proceeds of their criminal activities.

In recent years, the city has also emerged as a hub for laundering gold and diamonds from conflict zones.

The addition of the UAE to the grey list is likely to affect the country’s reputation and economic rating.

The development is the latest of many woes that have recently befallen the UAE, particularly as the emirate has, over many decades, sold itself as the best business destination in West Asia.

In January and early February this year, the UAE suffered several retaliatory missile and drone attacks by the Yemeni Armed Forces in retaliation for UAE participation in the Saudi-led military coalition that has been waging war on Yemen since 2015.

The airstrikes have significantly affected investor confidence in the UAE.