The UAE has been dealt an unexpected blow to its reputation by the international Financial Times watchdog Financial Action Task Force (FATF).

The UAE, and particularly Dubai, has long been known for the ease with which enormous quantities of money may be moved in and out of the country, as well as lax oversight in areas such as real estate transactions.

The Emirates were included with 22 other nations on a grey list and will be subjected to "increased monitoring".

Although their inclusion on the list may not stop foreign financial institutions from setting up branches in the country, it could raise costs for local banks and international lenders could be faced with complicated issues.

In 2020, the FATF expressed "concern" over the UAE's minimal number of money-laundering prosecutions, particularly in Dubai, and asked the nation to tighten its anti-money laundering efforts.

Prior to the release of the report, Emirati officials claimed that the UAE had taken several efforts to address the FATF's concerns and had considerably enhanced the authorities' capacity to crack down on "dirty money" flows in all seven emirates of the federation.

The UAE's Executive Office of Anti-Money Laundering and Countering the Financing of Terrorism said in a statement that it takes its role in "protecting the integrity of the global financial system extremely seriously," pledging "robust actions and ongoing measures" to "identify, disrupt, and punish criminals and illicit financial networks."

According to the FATF, a part of the action plan involves the UAE providing additional resources to its financial intelligence to strengthen its analysis function and ability to pursue high-risk money laundering threats, demonstrate an increase in effective investigations and prosecutions of various types of money laundering, and proactively identify and combat sanctions evasion.