In a notice posted on the Yahoo website, the search engine giant reported "a coordinated effort" to gain access to its email accounts.
"Based on our current findings, the list of usernames and passwords that were used to execute the attack was likely collected from a third-party database compromise," the company says. "We have no evidence that they were obtained directly from Yahoo's systems.
"Our ongoing investigation shows that malicious computer software used the list of usernames and passwords to access Yahoo Mail accounts. The information sought in the attack seems to be names and email addresses from the affected accounts' most recent sent emails."
Yahoo said it is resetting passwords on impacted accounts and is using two-factor authentication to allow users to do the reset. Users who were affected will get a prompt to change their passwords, and the company also sent out email and SMS notifications.
The search engine giant did not disclose details on the attack, but said it is working with federal law enforcement agencies and that it has "implemented additional measures" to block attacks.
Although Yahoo did not identify the third party that was compromised, experts note that attackers are increasingly finding ways to breach their targets by cracking systems belonging to their business partners.
"From this latest breach of Yahoo email accounts, we're seeing how cybercriminals are using the digital linkages among partner networks and supply-chain connections to get into the parent network's database," notes Bala Venkat, chief marketing officer at application security vendor Cenzic. "It is becoming an all-too-familiar tale that bears its ugly head again.
"As companies do business and open up connections with partners and their supply-chain network, it makes an important mandate to ensure their third-party connections are certified secure. This new dimension the cybercriminals know can be easily exploited to get to the treasure chest is very real and must be addressed by companies in a hurry."
Erik Cabetas, managing partner at consultancy Include Security, says the Yahoo breach illustrates the value of two-factor authentication on email accounts and popular websites.
"Two-factor authentication has again shown to be an effective barrier to account compromise," Cabetas says. "Any users with two-factor authentication in force wouldn't have been compromised by this attack campaign. Yahoo has offered two-factor authentication since December 2011."
Many experts said the attack illustrates a need for better password management.
"The fact that usernames and passwords were stolen is scary for both consumers and enterprises, since most people use the same credentials for personal and work accounts," says Eric Chiu, president and co-founder at HyTrust, a cloud security company. "We will likely see more hacks and phishing attacks as a result of this breach."
Hord Tipton, managing director at security professional association (ISC)2, agrees. "Diversifying your passwords for each account is essential to protecting all of your online information," he says. "Once a password has been stolen, hackers often attempt to access multiple accounts, compounding the potential damage."
Tipton recommends using long, complex passwords, changing passwords every 60 to 90 days, and storing password data in an encrypted password vault.
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