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Yahoo, Microsoft Ally to Tackle Lottery Scams

As the global economy sinks deeper into crisis, security experts are warning that online scams are on the rise -- particularly "lottery" scams, in which a fraudster claims recipients have won lots of money but requires an up-front payment to assist in processing or transfers.

In response, Yahoo (NASDAQ: YHOO) and Microsoft (NASDAQ: MSFT) have temporarily put aside their differences. The two are teaming up to educate consumers about the perils of lottery scams while working with Interpol and national law enforcement groups.

As major providers of free, Web-based e-mail accounts, both online giants are in a position to alert users to the hazards of "too good to be true" offers received via unsolicited e-mail, and to also help law enforcement catch suspected fraudsters, who often rely on the companies' e-mail services to send their messages.

The coalition, which made its debut during the 6th German Anti-Spam Summit in Wiesbaden, Germany, "is trying to attack one specific trick, which is using trusted brands like Yahoo and other coalition members to add credibility to their scams," Mark Risher, Yahoo Mail's antispam and platform group product manager, told InternetNews.com.

Yahoo and Microsoft also joined forces with two large financial groups with a stake in curbing the scam -- Western Union and the African Development Bank. "People have been trying to get victims to transfer money through these organizations," Risher explained.

The effort comes at a time when online scams are proliferating and more likely to succeed because of economic conditions, the companies said.

Spam constitutes 80 percent of all e-mails sent, and about seven percent of spam is related to the lottery scam and its close cousin, the "419" scam, Dermott Harnett, security vendor Symantec's principal analyst for antispam engineering, told InternetNews.com. In a 419 scam, the spammer offers a share of a multimillion-dollar sum if the target can pay them a small, advance fee to help them move the money out of their country. The con is named after the 4.1.9 section of the penal code of Nigeria, where many such scams originated, according to spam-fighting organization Spamhaus.

According to Trend Micro spokesperson Michael Sweeny, "multiple tens of millions" of such scam e-mails are sent daily. Many of these drop the names of major financial institutions in an effort to appear more credible.

Yahoo, Microsoft, Western Union and the African Development Bank "share a common interest in addressing cybercrime and online scams," William Godbout, chief security officer at African Development Bank, said in a statement.

"There has been an exponential increase in the volume of online criminal activity using our trademark. Although there is no financial loss to the bank, these crimes impact our reputation and image," Godbout said. "The reputation of African banking, of African development institutions and of the African continent in general are significantly jeopardized by the explosion in cybercrime falsely using African entities."

Spokespeople for the European offices of Western Union and the African Development Bank could not be reached for additional comment.

Singling out a scam

Although lottery fraud is just one of many common e-mail scams, such as those promising legitimate, name-brand Swiss watches or low-cost Canadian drugs, Yahoo is targeting lottery scams because it's the form that the company's users most complain about, Risher said.

Yahoo has "almost 300 million users on the planet," and many are responding to lottery scams because "they're finding it difficult to pay their mortgage or to make ends meet," he said.

Additionally, Microsoft released the results of independent research into lottery scams in Europe. Of the 4,930 people interviewed, 2.3 percent had said they had lost money to an Internet fraudster during the past 12 months.

A Microsoft spokesperson told InternetNews.com by e-mail that the coalition "is part of Microsoft's ongoing commitment to Internet safety for consumers." The company earlier this year called for a series of industry-wide actions and strategies to improve trust in the Internet and e-commerce.