The latest information on phishing indicates that fraudsters are increasingly using malicious software to direct users to their deceptive sites.

The Anti-Phishing Working Group (APWG) said in a new report Thursday that it saw a sharp rise in November in malware that directs users to DNS servers controlled by phishers.

DNS servers play a crucial role in locating Web sites. The servers translate a domain name into an IP address, enabling a Web site to be located and accessed through a browser.

Often, the phishers will set up their own DNS server that works fine most of the time but can redirect to their own malicious site.

Tainting a person's DNS settings is particularly dangerous since the user probably won't notice the redirection, the APWG said.

"The fraudulent server replies with 'good' answers for most domains; however, when they want to direct you to a fraudulent one, they simply modify their name server responses," the report said.

Phishers are also employing malware that modifies an internal PC file called the hosts, which is used to match domain names of Web sites with IP addresses.

When a person visits a Web site, the browser checks the hosts to see if it has an IP address for a particular domain name. If the hosts file is corrupted or hijacked, the browser can be directed to fetch a different Web page than the one the user intended to go to.

Both attacks -- also known as pharming -- are dangerous, since a user may be typing in the correct URL but be directed to the phishing site.

The APWG reported that the overall number of unique phishing sites declined in November, but 178 different brands were targeted, a record number. By comparison, 120 brands were used in phishing attacks in October. The highest previous total was in April 2007, when 174 brands were targeted.

More Middle Eastern and European financial services companies were spoofed in phishing schemes, APWG said. The financial services industry is the most targeted for fraud, comprising 93.8 percent of all phishing attacks.