US Partnering with Israel to Counter Ransomware, Regulate FinTech

The United States is partnering with Israel through a new task force to identify a policy path that will foster growth and healthy competition in the rapidly expanding market for financial services technology while deterring ransomware and other cyber threats, according to the Treasury Department. 

“Harnessing both the power of international cooperation and of technology innovation will position us to support economic competitiveness, prosperity, and to combat global threats including ransomware,” Deputy Treasury Secretary Wally Adeyemo said in a press release from Jerusalem. “As the global economy recovers and ransomware and other illicit finance threats present a grave challenge to Israel and the United States, increased information exchanges, joint work, and collaboration on policy, regulation, and enforcement are critical to our economic and national security objectives.”

Adeyemo met over the weekend with Israeli Finance Minister Avigdor Lieberman, Central Bank Governor Amir Yaron, Director General of the Israeli National Cyber Directorate Yigal Unna, and local financial technology and cybersecurity entrepreneurs, according to a readout Treasury released Monday. Discussions included “economic opportunities, shared national security priorities, including Iran, countering terrorist financing and proliferation financing, and regional terrorist threats,” Treasury said.

His visit followed a summit the Biden administration held last month with representatives of 32 nations and the European Union on countering ransomware. Israel participated in the meeting where Adeyemo highlighted the need for international cooperation to disrupt the ransomware business model by preventing the abuse of virtual currencies.

The task force is part of a strategy the administration is pursuing that involves global, cross-agency collaboration and weaving cybersecurity in with human rights, trade and broader national security considerations.

Adeyemo’s office has been working through Treasury’s Financial Crimes Enforcement Network to identify virtual currency exchanges to sanction for facilitating ransomware payments. Treasury has repeatedly warned other financial services entities such as insurance companies that they also run the risk of sanctions violations by making ransomware payments to entities that could be linked to blacklisted regimes like Iran and North Korea.  

The U.S.-Israel collaboration has been overshadowed by recent U.S. actions against Israel’s notorious surveillance firm, the NSO Group, but supporters say the new partnership is relevant given Israel’s place in the FinTech ecosystem.

NSO’s woes have compounded since its placement on Commerce’s list of entities requiring a special license to receive goods or services from U.S. suppliers. The company’s slated CEO walked away from the position Thursday and Wall Street is apparently worried the company won’t be able to repay its debts. But Israeli companies make up a significant share of a booming market for financial services technology, or fintech. Israel placed third in recent global fintech rankings, behind only the U.S. and UK.   

FinTech companies have done particularly well over the course of the pandemic given the increased demand for digital financial services in remote environments. But some of those, specifically those related to virtual currencies, have allowed ransomware perpetrators to elude law enforcement and threaten critical infrastructure. And a recent breach of financial investment firm Robinhood, which exposed the personal information of millions of customers, highlighted the generally unregulated nature of the space compared to the traditional banking industry where "reasonable" security is governed by the Gramm-Leach-Bliley Act.

In Israel, meanwhile, open-banking legislation that could force banks to share consenting customers’ information with fintech startups—an effort to put consumers at the center of transactions involving their data—is gaining momentum after years of inaction. But banks there have resisted the move, citing security issues. In the U.S., the banking industry has voiced support for attaching legislation to the National Defense Authorization Act that would, “harmonize new incident reporting requirements with existing laws and regulations.”   

Adam Flatley, director of threat intelligence for the firm [redacted] and a member of a key U.S. task force on ransomware, told Nextgov it makes sense that the administration is partnering with Israel to navigate policy issues in the fintech space.

“Israel has a long history of focus on security in the fintech space, and there are a lot of fintech companies in Israel,” he said. “They have the talent and experience to be good, effective partners in this space. It’s also important to highlight that this will likely just be one of many bilateral relationships created in the fight against ransomware actors, and that it'll be important to create many more of these with countries around the globe who each will have the ability to impact cyber crime in their own spheres of influence.”

Treasury said the U.S.-Israel task force will develop a memorandum of understanding on “supporting (1) permissible information sharing related to the financial sector, including cybersecurity regulations and guidance, cybersecurity incidents, and cybersecurity threat intelligence; (2) staff training and study visits to promote cooperation in the area of cybersecurity and the financial system; and, (3) competency-building activities such as the conduct of cross-border cybersecurity exercises linked to global financial institutions financial and investment flows.”

There will also be a series of technical exchanges on policy and regulation, including with “cyber analytic firms, fintech and regtech innovators,” Treasury said, adding that in that vein, the department plans to participate in the CyberTech Global Tel Aviv conference in Israel in January 2022.

Flatley, who spent over a decade as a technical lead at the National Security Agency, said, “International partnerships are going to be absolutely critical in the battle against ransomware actors.”