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How Hackers Crippled Iran's Financial System - Tech News Briefing

Iran's already-precarious financial system was brought to its knees by Israel-aligned hackers . The WSJ's Angus Berwick walks us through the cyberattack. Plus: Research suggests companies should pause before promoting the AI in their AI-powered products and services. Katie Deighton hosts. Full Transcript This transcript was prepared by a transcription service. This version may not be in its final form and may be updated. Katie Deighton: Welcome to Tech News Briefing. It's Tuesday, July 1st. I'm Katie Deighton for the Wall Street Journal. All those ads marketing the AI-powered credentials of products, services, and, well, almost everything, they may not be vibing with consumers as planned. Two new studies explore why that could be. Then, while Israel and the US were bombing Iran's nuclear sites, another less visible battle was raging. Cyber attacks on Iran's financial infrastructure have hobbled the country, breaking ATMs, halting payments, and breaching Iran's largest cryptocurrency exchange. We explore what happened on the cyber war's front lines. But first, it seems like almost every company is marketing the AI part of their AI-powered goods at the moment. But recent research has found that doing so could backfire and actually turn consumers off companies that do so. WSJ Contributor, Sean Captain, has the story. Sean, how are consumers lately responding to these "powered by AI" labels? Sean Captain: Well, we looked at two studies. The main one was done out of Washington State University and Temple University and the conclusion was that it actually hurt people's perceptions a little bit. Essentially, their willingness to want to seek out or buy the product. We looked at a second study that just released from a market research company called Parks Associates that also found a little more hesitancy to buy a product if AI were mentioned. It wasn't like it was a kiss of death to say AI. It was that people were a little less inclined to buy it. Basically, it didn't help their cause, but it didn't send people running away from the product. Katie Deighton: What kinds of reasons did the researchers that you spoke to offer to explain this less than positive reaction to these AI labels? Sean Captain: Yeah. There was really a lot of probing of that in the university study and they talked about a cognitive understanding of AI and sort of a more emotional understanding of it. And their assumption and conclusion was that because people aren't exactly sure what the AI is doing or, in some cases, why it's even in there. For example, they asked about an AI equipped refrigerator and it was like, "Huh?" So because they didn't know what was in it, they were a little more suspicious of it or at least hesitant about it. And it became a bit more of an emotional kind of reaction like, "I don't quite understand this but it makes me feel a little bit uneasy." Katie Deighton: How did age factor into consumers' reactions? Sean Captain: So the university study, they had a representative sampling of ages from pretty young to pretty old. But once you broke that down, they only had about 100 people in each group so they couldn't really have a large enough sample to say how age mattered. However, the second study by Parks, the market research study, they spoke to about 4,000 people on this question. Very similar question about, "Would you be more inclined to buy if had AI?" And they found a clear difference among ages. So the younger groups, say in their 20s up to 40s, were more disposed to buy something if it had AI in it. And then, you get into the 65-year-old group and they were less so. So it could be that what we're seeing reflects the current market. But in the future, AI may end up being a bonus. Katie Deighton: In light of all of this, what did your sources recommend to companies wanting to advertise their AI-powered tools and products? Sean Captain: Well, essentially that they just make it clear what the benefit is to them. They did find that in some cases it was clear. So, the university study. And I should point out that the products they asked about in the university study were all fictional. So it was like a company called Elevo that made TVs or Neura that made cars, for instance. But what they found was that, in some cases, impressions were less negative or more positive. For instance, a customer service chatbot. People got the idea of that very easily. But for example, the refrigerator, it was just a bit of a disconnect for people. Another thing that I learned from Parks as well is that people would appreciate AI in home security things, like a Ring doorbell kind of thing. Because anything that would help them get better information and maybe assess a danger could be something that the researcher thought that they would be positively disposed to it. But like I say, if it's not really clear what it does, the research says that people instead go to the negative, "What's it going to cost? What are they going to do with my data? How is this going to make the product harder or less desirable to use?" Katie Deighton: That was WSJ contributor, Sean Captain. Coming up. A pro-Israeli hacking group caused widespread damage to Iran's financial system. We'll explain how after the break. Israeli authorities and a pro-Israeli hacking group have sent portions of Iran's precarious financial infrastructure into disarray. Targeting a state-owned bank and a popular cryptocurrency exchange. US sanctions imposed on and off for decades have aimed to cut Iran off from the international financial system but the recent cyber attacks led Iran's government to pull the plug on much of the country's online activities. WSJ Reporter, Angus Berwick, joins us with the details. Angus, can you paint a picture of how damaged Iran's financial and cyber systems are right now? Angus Berwick: Since Israel started targeting Iran, other than bombing the nuclear sites and assassinating Iran's nuclear scientists, they've also dealt a pretty serious blow to Iran's financial infrastructure. They've crippled a pretty key state-owned bank in Iran, Bank Sepah, which services a lot of Iran's military. They also took out Iran's largest cryptocurrency exchange called Nobitex which has become quite an important channel for Iranians to move money in and out of the country, sidestepping the US economic blockade against Iran. Katie Deighton: How have the attacks affected the day-to-day lives of regular Iranian citizens? Angus Berwick: So with the banks, they paralyzed online payments. A lot of cash machines stopped working. There were reports in Iranian state media that military retirees weren't being paid out their salaries. And with Nobitex, people inside Iran and outside of Iran, they've seen this vital channel for foreign money flows effectively been cut off over the past two weeks. And the exchange says that it's trying to restore its services, but at this time it's still partly hobbled. Katie Deighton: And to what extent was this attack orchestrated by Israeli authorities versus pro-Israel hacking groups? Angus Berwick: Most of this damage has been done by a pro-Israeli hacking group called Predatory Sparrow. They directed the hacks against Bank Sepah and Nobitex. Predatory Sparrow, they don't say whether they're acting on behalf of Israeli authorities. They operate anonymously and they've been tweeting about their hacking operations as they've been carrying them out. I spoke with Israeli government officials about the hack. They said that they didn't have any information about potential connections between the group and the Israeli state itself. However, people in the kind of cybersecurity community, when they're assessing this hacking group's activities, they think that it does fit the profile of a potential group that is in some way backed by Israeli authorities. Katie Deighton: And Predatory Sparrow, how much do we know about who they are and how they operate? Angus Berwick: We don't know who's behind the curtain there. All we have is a kind of anonymous X account that tweets about these hacks. However, they've been active since at least 2021, and at least according to researchers, have been exclusively targeting Iran. They've carried out very disruptive hacks before such as knocking out a lot of the payment terminals that people use in gas stations in Iran. So this is just the latest in their attempts to sabotage Iranian infrastructure. Katie Deighton: How much do we know about the support that Israel is offering Predatory Sparrow? Angus Berwick: We don't know too much about the support itself. Looking at how the group conducts itself, how it's exclusively focused on Iran. It said that it targeted these financial institutions because they are the financial lifelines of the Iranian military. And what's more, this group, they managed to extract about $100 million worth of funds from this cryptocurrency exchange, Nobitex. And instead of keeping this money as you would expect a hacking group to do, now that's a pretty hefty bounty, they actually burned this cryptocurrency sum by sending the funds to digital wallets which they don't have any access to. Katie Deighton: And how have Iran and pro-Iranian groups responded to these attacks? Angus Berwick: So Iran, the government has descended into a state of paranoia, both resulting from these hacks and, obviously, the broader military actions against them and their fears of an uprising against their authority. So Iranian authorities, they largely pulled the plug on the country's internet. Foreign-based websites weren't accessible. The government was warning citizens to not use foreign phones or foreign messaging platforms out of concern that Israeli spies could get people's data. Government officials were told not to use smartwatches and laptops for similar reasons. Katie Deighton: Last week, Israel confirmed a ceasefire with Iran. Do your sources anticipate there will be a technological ceasefire as well? Angus Berwick: In the background, there's always quite a high degree of cyber warfare taking place between Iran and Israel or at least between hacking groups that are aligned with either governments, whether the bombs are flying or not. At least with the researchers that I've spoken to, they do anticipate that this sort of shadow cyber war will continue even though an official ceasefire has been declared. Katie Deighton: That was WSJ Reporter, Angus Berwick, and that's it for Tech News Briefing. Today's show was produced by Julie Chang with supervising producer, Melony Roy. I'm Katie Deighton for the Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.