“Remember what it was like to be on the grey list, and avoid that fate”

In an exclusive interview with BIZWEEK (bizweek.mu), Tom Keatinge, Director of the Centre for Finance and Security at the Royal United Services Institute (RUSI), discusses the expectations of the Financial Action Task Force, the challenges faced by Mauritius in its assessment, North Korea’s influence on financial centres in Sub-Saharan Africa, and issues pertaining to cryptocurrencies, virtual assets, and illicit finance in elections. He also addresses the financing of the Russia-Ukraine war and the stance of the new U.S. administration under Donald Trump. Our guest also shares his journey from being an investment banker at JP Morgan to becoming an expert at RUSI, one of the world’s oldest defence and security think tanks, and a leader in its field in the UK.

Tom Keatinge visited Mauritius with other RUSI experts for a two-day workshop at the Financial Services Commission (FSC) on addressing risks and safeguarding financial systems from illicit trade networks and proliferation financing. This programme is funded by the British High Commission of Mauritius.

Editor-In-Chief: Rudy Veeramundar | Photographer: Harry Chetty

“Mauritius needs to be realistic about whether it’s kept up with the movement of the FATF train”

You are in Mauritius for a two-day workshop focused on countering proliferation financing. Could you please provide some context for this event?

We are here (Editor’s note: the interview was conducted last Tuesday) to talk with the local government agencies and departments, the banks, the trusts, company service providers and the private sector to understand the challenges they face in implementing sanctions, because it’s not easy. It’s easy to write it on paper, to say to implement sanctions, but doing it, practically speaking, is quite challenging. We’re here to have that conversation, to understand what challenges the country faces, and importantly, to help prepare for the next evaluation of Mauritius by the Financial Action Task Force (FATF).

What would be your first assessment of the challenges of this sector?

We have to go back to 2018, which is the last time that Mauritius was evaluated by the Financial Action Task Force. Unfortunately, Mauritius didn’t get a great grade. Many countries get a bad grade, but Mauritius took that message very well, and from 2018 to 2021, reforms that were necessary to comply with the requirements of the FATF were introduced. What does that mean? That means that there is better awareness in the private sector of what it means to implement sanctions. For example, there are a number of internationally operating banks in Mauritius that are well educated, not just by the local authorities, but also because their headquarters is in Johannesburg or in London. That’s the first thing. There is clear awareness amongst the government community of what it is required to do when it comes to the Financial Action Task Force Review, specifically in implementing these sanctions.

So, you know what to do, but can you do it effectively? What could happen, to make things more effective, is more collaborative working. We are big fans of the concept of public-private partnership. Everybody has something to contribute to a strong implementation and a strong evaluation. It’s not easy for the government and the private sector to work together, but if we can encourage and create an atmosphere where everybody realizes that they’re on the same side, that they’ve got the same mission, then we’ve done a good job.

Mauritius quickly complied with recommendations after its grey listing. What are your thoughts on Mauritius, as a financial jurisdiction, now? Referring to a point you made at the opening of the workshop, the upcoming FATF assessment will focus on effectiveness rather than simply fulfilling formal requirements of ticking the box. Could you provide more detail about this?

Mauritius reacted very positively to its grey listing in 2020. It came off the grey list in almost record time. The authorities deserve tremendous credit for achieving that success. The problem with the FATF is it’s a constantly evolving beast. Whereas Mauritius might have been fine to get off the grey list, the train has kept moving. Mauritius needs to be realistic about whether it’s kept up with the movement of the FATF train. What I would be recommending is a very honest self-assessment of what progress the country has made over the last three or four years since the end of the grey listing, what progress FATF has made in that period, and whether Mauritius has kept up with that progress. The FATF evaluation is an extremely onerous process, and the countries that get into trouble with the process are the ones that are like the university student who thinks that he can spend all term in the bar and then panics and crams the night before the exam. That is not a model for approaching the FATF. You have to be methodological, you have to work over time to gather the information that the FATF is going to require from you. You have to work in a way to show that you have been generating court cases and asset seizures. This is what the FATF will want to see.

It’s a job that starts now, not tomorrow. It’s important that Mauritius coordinates that. Many people that we’ve met understand the FATF. They know what the FATF is about. I haven’t yet met the person who says, “I am going to be responsible for ensuring success in the evaluation.” Having someone, a civil servant who is empowered by a minister to basically be the responsible person for pulling everyone together, would be my top tip.

My second tip is to approach this as a whole-of-society response. What I mean is collaboration between government and the private sector to achieve success. The government cannot achieve success by itself. It needs the private sector on board. The sooner there are regular meetings to talk about what is needed, to make sure everybody understands what the mission is, the better. With strong leadership and collaboration, you’ll get a good start.

You’ve been here for a few days. Have you witnessed leadership and collaboration? 

I have seen what some people call green shoots. You’ve got expert financial institutions here willing to collaborate. There’s no doubt. You have, for example, international banks in Mauritius that have a track record of collaborating in other jurisdictions. Banks like HSBC, which is very active in helping build public-private partnerships around the world. You should take advantage of that experience.

You have a motivated minister (Editor’s note: Dr Jyoti Jeetun, minister of Financial Services and Economic Planning), obviously a new minister. She has experience in the private sector, both in banking and real estate. She understands what it’s like to be both on the government side of the tracks and the private side of the tracks. You then have a community of civil servants who are fluent in the FATF responsibilities. So, all the pieces are there. That’s why I think that if there was one person who was empowered to pull all the pieces together, it would be a really easy job. I’d love to do it myself, because I can see how it would work.

Who should take on that role? Someone from the regulatory body or from a commission that could be established? 

I don’t think a commission needs to be set up. It needs to be somebody who is either in the Ministry of Economy, or maybe in the central bank. The critical thing is that they are empowered to be the coordinator. One of the challenges that countries face when approaching the FATF is that everybody is expected to add FATF responsibility to the job they’re already doing. It ends up being on the side of their desk. It ends up being something they do at the weekend or in the evenings. There must be one person whose sole job, for the next two years, is to ensure that the whole system works towards the mission of getting a good FATF evaluation.

I would point to a jurisdiction like Jersey. In Jersey, which is quite a high capacity financial centre, they approach their financial action task force evaluation, which was last published in July 2024, as a national mission. There was one very charismatic guy who basically was the cheerleader, and brought everybody together. That’s a model that I would recommend.

Is this a full-time position then?

It should be a full-time job for the next two years. Somebody who makes sure that everything that needs to happen in relation to a successful evaluation is in place.

Would you like to add any final thoughts or remarks on the FATF charter?

The point that I would emphasize is that I have noticed how many people that we’ve spoken to are aware of what it meant to be on the Financial Action Task Force grey list in 2020 and 2021. The community did a great job to get off that list as fast as possible, but I would encourage the community to remember what it was like to be on the grey list and to do whatever is necessary to avoid that fate again. And that means preparation, collaboration and leadership in the run up to the evaluation in 2027.

“Banks should put on their proliferation glasses”

• “North Korea’s most active regions for raising revenue is Sub-Saharan Africa”

In a previous interview given to online media, you discussed various topics, including nuclear finances, the weapons program, and the effectiveness of sanctions in halting nuclear production. Could you please provide further information and explain to our readers how Mauritius, as a financial jurisdiction, should address this concern? Considering our geographical remoteness and distance from North Korea, we are largely reliant on periodic updates. How should we assess our level of concern in this context?

Firstly, every country around the world is required to implement UN Security Council resolutions. Mauritius needs to take what is decided at the UN seriously and implement it. The question that people often ask is, “we’re an island in the middle of the Indian Ocean, what’s North Korea got to do with us?” First of all, I would point to two things. One, Mauritius is a financial centre. It might not be London, it might not be New York, but it is a financial centre. It has a trust and company service provider industry, and it has an international bank operating here. It is sitting in the middle of financial flows and one thing we know about people who want to evade sanctions is that they need financial centres, but they also like to use financial centres which are perhaps less obvious. Will they come to London? Maybe, but perhaps they’ll come to Mauritius because, as you say, Mauritius is a long way from North Korea, and people might think there’s no connection.

Secondly, one of North Korea’s most active regions for raising revenue, for earning money through providing services, is Sub-Saharan Africa. If you think about the financial connections that Mauritius has, Africa is very important. You have banks like Absa bank here in Mauritius, which has its headquarters in South Africa. I think there are a couple of reasons why there might be more risk in Mauritius than one would first imagine, and the construction that North Korea does in Africa, the training provided to police forces in Africa, which it has historically done, is all about earning money for North Korea. And you know Mauritius has financial connections to Africa. So, who knows?

How should we progress in ring-fencing our jurisdiction from the influence of North Korea?

It’s very difficult to completely isolate yourself. The only way you would isolate yourself is to say that you’re not going to do financial transactions with anybody ever again. That would obviously be damaging to the Mauritian economy. The key elements in this are first of all that everybody involved understands their obligations, their responsibilities, and importantly, the risks. That the government understands, when it is supervising banks, lawyers, trusts and company service providers, what risks to look for.

The second thing is that the private sector understands that it is potentially exposed and what risks it should be thinking about. For example, I’ve got a new customer contacting me from Uganda, and they want to open a bank account or use Mauritius as a financial centre. I know that Uganda has a historic connection with North Korea, and I know that North Korea has earned revenue in Uganda, so maybe I want to take a timeout to think carefully about that. One of the things that we expect banks to do is to worry about things like money laundering, and laundering the proceeds of corruption for example. I think banks are getting better and better at doing that. What we’re asking is for banks to take a timeout and say, “maybe I should put on my proliferation glasses and I should look at my clients in a slightly different way and decide whether or not those clients represent, perhaps not a money laundering risk, but a potential proliferation financing risk.”

What more can you tell us about proliferation financing?

Since the 1960s, there’s been a nuclear proliferation treaty to try and control the extent to which nuclear weapons expand around the world. The genie is out of the bottle. You cannot forget the nuclear technology.

What the international community has wanted to do for many decades is to ensure that that technology is held by responsible countries and does not expand into the hands of those that might want to use it for bad actions. Not just countries like North Korea, but also organizations or terrorist groups and so on. It’s important that we control this technology and restrict access to it so that, frankly, it never gets used in a military war scenario. Unfortunately, there are people who make it their business to share that technology around the world. There was, for example, a quite infamous Pakistani gentleman called A.Q. Khan. What the international community has tried to do is, through bodies like the United Nations, and with global international consensus, to ensure that rules are set, and that those rules are then enforced. One of the mechanisms for trying to enforce those rules – beyond everything else that the United Nations does – is the Financial Action Task Force, which focuses exclusively on trying to restrict any financing that might facilitate the sale of WOD products or the procurement of technology that’s needed.

We often hear about North Korea and its nuclear threat. From your perspective, how real is this threat? Can they actually trigger a nuclear event?

The threat is very real because the country has the capability. My brother is a journalist. He used to live in Japan, and Japan fairly regularly tracks missile tests by North Korea over its territory, which splash down in the Pacific Ocean. So, it’s not like the threat is imagined. The first thing I would say is that it’s real. The second thing is, if you look at how North Korea is supporting Russia in its war in Ukraine, that’s not nuclear support, but North Korea is willing to project its military capability outside the borders of its country. We have to take the threat seriously. I don’t think anyone can realistically say that North Korea is a responsible guardian of nuclear technology, and frankly, you better be safe than sorry. Nobody wants to be turning around and saying, “I told you so, they just fired a nuclear missile at the United States.” The range of their missiles is thousands and thousands of kilometres. You’re in range in Mauritius. Not that I expect Mauritius would cause North Korea any trouble, but the point is that it’s not just a threat that is confined to the Korean Peninsula. This is a threat which is global. The response has been agreed at the United Nations. We should all take it seriously.

How successful has RUSI been in raising awareness in Africa and other parts of the world?

We’ve been working on raising awareness on the proliferation finance topic since 2016. We’ve had the privilege to visit certain countries a number of times, and there’s no doubt that we have seen an increase in knowledge. We’re not the only ones who do that work, I hasten to add. There are others that do that work.

Proliferation finance, from the perspective of the Financial Action Task Force, only became a requirement, a focus, in 2012. It’s barely more than 10 years ago, and countries have only been evaluated once on their response to proliferation finance. We sort of started the journey at the same time as every country started the journey, and what we’ve enjoyed doing is helping countries think about how they might be exposed to proliferation finance, what their private sector can do in order to contribute to a country’s response to proliferation finance, and ultimately make sure that when the Financial Action Task Force evaluators come and visit you, you are demonstrating awareness. If you read the reports of the countries we’ve visited, they sometimes cite our work, which is very kind of them, but hopefully, we’ve helped them be a bit smarter.

“Cryptocurrency is more of a challenge than normal money”

What challenges do virtual assets, like cryptocurrencies, present in preventing proliferation financing, and how can we address them? 

We started the program that I lead at RUSI in 2014, just over 10 years ago. If I look at the way in which the financial system has changed in those 10 years, it’s a night and day difference. What we have to look at is all these technologies, financial technologies, new payment systems, cryptocurrencies, all these things, and make sure that we are adapting our controls, our checks and our scrutiny to reflect these new changes. For example, cryptocurrencies can move money across borders without involving banks. That’s a potential risk there, because people can move money from Uganda to Mauritius without the need for any banks at all, for example. How do we set up systems to make sure that these money movements, if they are dirty, are then going to be controlled somehow? We have to look at how cryptocurrency enters the main economy. Well, it normally enters the main economy through an exchange. We need to make sure that these exchanges have good controls and are asking the right questions about where the cryptocurrency is coming from.

One of the themes of the last 10 years has been the increased sophistication, increased use of technology to move money around the world, and the authorities, whether it’s the Financial Services Commission in Mauritius, or anywhere else, need to make sure that the system has new controls in place to deal with those threats. Financially, the world has become borderless, and so, we’ve got no borders to police anymore. What we need to think about is where the points of intervention, like cryptocurrency exchanges, like banks and others, are, that we can control to try and make sure that dirty money, if it is in the system, can’t move very far.

Is this more of a challenge, compared to normal money?

Cryptocurrency, clearly, I would argue, is more of a challenge than normal money. I mean, cryptocurrency can be traced on the blockchain, blah, blah, blah… There are lots of people who are boosters for cryptocurrency, including the new President of the United States, Donald Trump, of course. But I think that, fundamentally, there are many reasons to ask if there is any practical reason for having cryptocurrency beyond being able to move money around without it being easily traced, beyond the reach of banks, beyond the reach of the authorities? I certainly think that cryptocurrencies have significantly increased the challenge that law enforcement faces when it’s trying to police the financial system. Some argue that cryptocurrency is beneficial because it offers financial privacy, appealing to libertarians who oppose state monitoring of finances. However, this same feature also attracts criminals.

“Cryptocurrencies can move money across borders without involving banks. That’s a potential risk!”

“Money is being used to undermine our democracies or to bribe people to vote in a certain way”

We saw your 2023 paper titled “Democracies have been blinded to the threat of illicit finance” on your website. What inspired you to write it?

I wrote an article called ‘Democracies are blinded to the threat of illicit finance” for one particular reason. There is all this infrastructure built in every country around the world to combat money laundering, to basically address the proceeds of crime. Money that is dirty. But one of the threats that we face, and you saw it recently, for example, in the elections in Moldova, is that money is coming into countries, which isn’t dirty money, but it has a nefarious intention. And that is to undermine the democratic process, to buy votes, to bribe people to vote in a certain way. The point that I was making in that article was that, of course, we should continue focusing on the threat posed by criminal money. We should make sure we confiscate assets that are the proceeds of corruption and that sort of thing. But, we shouldn’t lose sight of the fact that money is being used to try and undermine our democracies, and to bribe politicians or to bribe people to vote in a certain way. And we’re really seeing that in a number of elections that we’ve looked at in the last couple of years in Europe and elsewhere. Moldova, I mentioned, is a case study. There’s been alleged bribery of members of the European Parliament in Brussels, for example, and we’ve seen money flowing into French elections. There are lots of examples you can point to where the money is not the proceeds of crime, but it sure as hell wants to cause a problem.

Are countries aware of this situation, and can it be stopped?

I think countries are waking up to the issue. I think we all believe passionately in our democracies. We believe passionately in the right of people to vote every four or five years to change the government or not, but I think countries are potentially naive. The reason I say that is because we live in much more contested geopolitical times. The reality is that five years ago, ten years ago, people were talking about the end of history and the end of the Cold War in the early 1990s. Everyone was going to be friends, blah, blah, blah. That is not what has turned out to happen. I can speak in particular from a European perspective. There was this hope in many countries that somehow Russia would join and hold hands with the European Union, but that hasn’t happened. Countries have been slow to wake up to the sort of covert threat that they’ve faced. One of the ways in which a dictatorship like Russia will try and influence democracies is by trying to use money as a way of manipulating what’s happening in elections. Countries are now probably aware. I would encourage people to look at the case of Moldova. The election in Moldova was very nearly overturned by money coming from Russia, by just one or two percentage points. It was very, very close. There are elections later this year in Armenia, another country which is in the orbit of Russia. There are great concerns in Armenia about that election being bought or undermined by Russian money. We need to work harder to make sure that our electoral legislation absolutely allows fair elections, but does not allow money to influence the elections, particularly money that’s coming from outside the country.

“We need to work harder to make sure that our electoral legislation absolutely allows fair elections, but does not allow money to influence the elections, particularly money that’s coming from outside the country.”

 

“We will all feel some form of financial influence from the U.S.”

The Russia-Ukraine conflict has tragically reintroduced war to Europe. What is the current state of weapon financing for this war, and in a broader context?

The major response from Ukraine’s allies has been to implement significant sanctions on Russia, and the reason for that is that the United States, Europe and others want to restrict the ability of the Russian regime to source the components and the financing that it needs for its war. These sanctions are not aimed at the Russian people. A bit like proliferation finance sanctions, they’re aimed at restricting the ability of Russia to raise the money it needs for its war and to procure the components of technologies it needs for its missiles, its drones and so on. That’s a big focus of the financial system and of the trade system in Europe and the U.S. I think we can say that those sanctions are working. Sanctions are never going to switch out the light overnight. They’re going to sort of slowly restrict. We can see that happening. Of course, unfortunately, the Russian military is still conducting its illegal invasion of Ukraine. There are still Ukrainian citizens dying every night in air raids of drones and missiles. It’s an interesting example of how sanctions can be used as part of an international security response.

What are your thoughts on how the administration and policies of the new U.S. president, Donald Trump, will influence the situation in Ukraine, nuclear financing, and other related matters?

When Donald Trump was elected the first time, I think I, like many other people, rushed out to buy his book the ‘Art of the deal.’ If you’ve not read the ‘Art of the Deal’, it’s very easy to read. You can read it in a short evening. It’s well worth reading, because you get an insight into how he functions. He is only about doing deals. Doing deals for international peace, doing deals for the United States, whatever it might be, but it’s all about doing a deal.

If you look at the landscape today, say, Ukraine and Russia, what does he want to do? Well, he wants to get a deal done between Russia and Ukraine, but in the context of doing that, he wants it to be a good deal for the United States. On that particular front, I can imagine that in the coming weeks, he will go tougher on Russia with sanctions, maybe more sanctions on oil. That’s a good deal for the United States, because the United States is the biggest exporter of oil around the world. If a country needs oil, it’s a bit risky to import oil from Russia, and then he’ll say, “Hi! I’m Donald. I’ll send you oil.”

I think that we will see financial tools being a central part of his international policy in the months ahead. How will he use them? I wouldn’t like to guess, but I am very interested from a research perspective. I’m very interested in how this will unfold, because as I say, I think we will all feel some form of financial influence from the United States in the months ahead.

“Je ne regrette rien…”

You spent 20 years as an investment banker at JPMorgan. What inspired your transition to your current role at RUSI?

The question people often ask me is, “why did you decide to take a zero off your salary?” (Laughs). The short answer is that JP Morgan was a very generous employer, and after you’d been there for many, many years, as I have been, you had the opportunity to take a sabbatical study leave year. So, I took a study leave year in 2011/2012, and I studied a Masters in Intelligence and International Security at King’s College London. I had a very inspirational professor for my course who said, “for you old students  (I think he was talking to me and a few others), I strongly recommend that when you write your research dissertation, you make sure that you keep one foot in what you know – so your career so far – and use the other foot to explore.” I thought that a great idea would be to kind of understand the role of finance in international security. So, I studied things like terrorist financing, sanctions and related topics, and it was around the time that ISIS, the so-called Islamic State, was expanding in Iraq and in Syria, and I had studied how this group was financing itself.

I went back to JPMorgan after doing my Masters, and during that year, I was feeling sort of restless. I wanted to do something more, and people were ringing me up and saying, “Oh, you’re the banker who’s interested in security. Why don’t you follow the interests that you developed at the university during your Masters?” So I left JPMorgan, and then I had the chance to go to a conference at RUSI, and someone said to me at the conference that they were thinking of setting up a research program about something to do with illicit finance and financial crime. And before I knew it, he persuaded me to help and write the business plan, and the next thing you know, here I am 10 years later.

Any regrets about leaving JP Morgan, and banking, for your current career?

“Je ne regrette rien,” as the song goes. I had a fantastic 20 years at JP Morgan. I asked JP Morgan for two things during my career. One was to give me the time to go and study my Masters, and they willingly did that, and the other one was to have the opportunity to leave on good terms, and they provided that opportunity. So, no, I don’t regret it. People often tell me that my life must be so good, so different now, working for a Think Tank, compared to working for investment banks, and what I say to them is that there are two things that are the same, and one thing which is different. The one thing which is different is, of course, the salary, but one thing that is the same is I spend all my time begging for money. We are a charity, so we’re constantly raising money for our activities. The second thing in common is I spend all my time telling people how great we are, that we are the best…

A lot of what I learnt at the bank is very relevant today, and probably the most important skill, the most important experience, is the networking, traveling, meeting people, talking to people about what we do and how we can help. Building the network is a skill which I’ve really enjoyed deploying while at RUSI.