The scammers began to see serious problems with their phishing scams sometime around April.

That's when they started realizing that more and more of their phoney "phishing" e-mails were being blocked. Security researchers had spent the previous year closely studying botnet networks of infected computers and they were getting pretty good at blocking many of the fraudulent e-mail messages that were being sent from these systems.

This was creating a problem for phishers -- online fraudsters who set up fake Web sites and try to trick victims into visiting them and giving up their user names and passwords. With fewer of their messages getting through, they had to send out more and more spam to work their scams.

By August phishing gangs homed in on a new way to make a buck.

Instead of asking people to visit a fake Web site, more and more phishers began asking victims to install browser plug-ins or other types of software. To pull this off, they'd send e-mail that comes with malicious software that's supposed to be a security update from a bank. Sometimes they'd simply purchase time on infected botnet computers and install code that steals banking credentials from machines that had already been hacked.

Attacks that install malicious software are easier to launch than they've ever been and are clearly on the rise, said Mickey Boodaei, CEO of Trusteer, a security company that makes desktop security software used by banks. "We're seeing a clear shift from phishing attacks."

Not that anyone thinks that phishing is going away. Attack numbers are still steadily climbing, but e-mail that includes phishing scams has tripled in the past year as phishers have become more technically sophisticated with their attacks, said Dave Jevans, chairman of the Anti-Phishing Working Group. "These are not things that just steal your passwords," he said. "These add you to botnets."

Some of this malware is pretty nasty. The phishers take advantage of their knowledge of banking Web sites to build custom code that runs inside the browser, silently stealing your online credentials, Boodai said. "They're trying to inject HTML pages into sessions with these banks to steal information," he said.

Earlier this month, Trusteer introduced a search tool so that banks and Web site operators can search through this malicious code to see if their domains are being targeted in these attacks: http://www.trusteer.com/FIsearch/open_search.php

Major financial brands such as Lloyds, Citibank, PayPal and Bank of America still account for the majority of phishing attacks, but phishers have been steering toward smaller financial institutions whose users may not be as prepared for a fake e-mail. They've also been going after victims outside the U.S. "With the European banks, it's been the worst year they've ever had," Jevans said.

And phishers aren't stopping at malware. They are constantly looking for new areas to hit.

In the past two months Jevans has also seen phishers spoof companies like FedEx and United Parcel Service with attacks that are designed to install malicious software on computers. And, in a worrying development, phishers have also targeted domain name registrars, hoping to steal credentials that could allow them to redirect entire Internet domains to their malicious servers.

Some security experts believe that such a phishing attack may have given criminals access to the CheckFree online payment service's Internet domain earlier this month. In that incident, which came about a month after customers of domain name registrars were hit by phishers, CheckFree customers were redirected to a Web site that tried to install malicious software.

Social-networking sites were also a prime target several months ago, although those attacks have dropped "dramatically," as Web sites responded to the problem, according to John Scarrow, general manager of safety services at Microsoft. "There's really an ebb and flow," to the attacks, he said.

Though the move toward malware has made phishing more complicated for some, there are plenty of newcomers too, according to Don Jackson, director of threat intelligence with SecureWorks. "There's no shortage of education, support, and helping each other in terms of setting up the scams."

Take Mr. Brain. Believed to be a Moroccan hacker, he develops free phishing kits for newbies so they can quickly get into the business. By all accounts, he does a great job, building slick phishing kits for banks that haven't yet been attacked. "He's the premier provider of these free phishing kits," Jackson said. "They're free and they're actually fairly accessible."

While his phishing kits are free, unbeknownst to the amateur criminals who download them, they come with a catch. All of the phishing data logged by these fake Web sites is automatically sent to Mr. Brain too. So the greenhorn phishers end up getting phished themselves.

But that doesn't stop them. The profits are too good, and because phishers can hit victims in faraway countries, many of them operate as if they are outside of the law. And with phishing toolkits and buyers for the stolen credentials easy to find, phishing continues to draw a new generation of criminals.

For them, phishing is easier than ever before, said Sean Brady, senior manager with RSA Security. "If I could call it anything, I'd call it a commodity crime."

(PC World)