The case surrounding New Zealander Keats was visa-related, and Welsh now have 14 days in which to appeal the decision.
Their next Premiership fixture is at Gloucester on March 23.
Panel chairman Jeremy Summers said: ''This was an extraordinary case, and one that it is hoped will never be repeated.
''The sanction imposed was structured to reflect the seriousness of the matter, which included conduct that was dealt with by the police, but also to import a rugby-based proportionality to the overall position that took into account the wider interests of the game.''
Summers was joined on the panel by Premiership Rugby chief executive Mark McCafferty and Peter Budge.
London Welsh's former rugby manager Mike Scott is the subject of a separate RFU disciplinary hearing relating to Keats' registration.
Scott has been charged under RFU rule 5.12 for 'conduct prejudicial to the interests of the Union or the Game'. Scott's case will be heard at a later date.
London Welsh brought the matter to the RFU's attention after conducting an internal investigation last month.
The club also said they wanted to stress than no fault in the matter resided with scrum-half Keats.
Welsh's arrival in the Premiership was not confirmed until last June, and only then after winning their appeal against a RFU ruling that they had not met sufficient criteria to gain Premiership entry, namely primacy of tenure at Oxford's Kassam Stadium where they have played their home games this season.
The appeal panel agreed with the club's argument that the applied criteria contravened EU and UK competition laws, and Newcastle were relegated after finishing bottom of the Premiership last May.
The delays hit Welsh in terms of player recruitment for the current campaign, but they have impressed many judges with their resilience and no lack of quality, which they highlighted by posting Premiership victories over Exeter, Sale, Bath and Irish.
They have not won in the league, though, since Dec 1.
Keats, 31, joined London Welsh from now-defunct Italian club Aironi and he has been an important part of their debut top-flight campaign.
Before Christchurch-born Keats headed to Europe, he played Super Rugby for the Crusaders and Wellington-based Hurricanes, and also featured in the colours of Taranaki and Nelson Bays.
The last Premiership club to be docked points were Exeter. They received a two-point deduction and ?5,000 fine in April 2011 for fielding too many overseas players in a league game against Leeds Carnegie.
Welsh have confirmed they will lodge an appeal against the Rugby Football Union's ruling, saying they are ''hugely disappointed and shocked'' with the decision.
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