Hackers are actively using exploit code to target a flaw in Microsoft's software that generated a special warning from the US government last week.

The problem concerns a networking function called Windows Server services within the Windows OS (operating system), used for filesharing and printing.

On 8 August Microsoft issued a patch, MS06-040, for the problem, which affected several Microsoft OSes. Security experts warned then that exploit code had been detected and could be used more widely.

However, the latest exploit code only affects users running Windows 2000 who have not applied the patch, Microsoft said. The impact so far from the malware, which the company calls Win32/Graweg, has been low, it said.

"We are not currently aware of widespread customer impact," Microsoft said on Sunday.

The Sans Institute has reported other names given to the malware by security vendors. Symantec calls it W32.Wargbot, while TrendMicro has named it Worm.IRCBOT.JK and JL, McAfee calls it IRC.Mocbot and F-Secure refers to the malware as IRCBOT-ST.

The malware is a 'bot', a class of malicious code that allows a hacker to take remote control over a computer. The malware appears to be a version of one called Mocbot, which first appeared in late 2005, according to Lurhq, a security company. Both Sans and Lurhq have said two similar versions of the bot are circulating.

Once on an infected machine, the bot contacts remote servers in China over IRC (internet relay chat), Lurhq said.

"Historically Chinese ISPs and government entities have been less than co-operative in taking action against malware hosted and controlled from within their networks," Lurhq said in an advisory.

The bot is capable of several malicious functions, Lurhq said. It can send messages through a user's AOL Instant Messenger account, an activity that could be used to trick other users into downloading the bot. It's also possible to use the bot to launch a DDOS (distributed denial-of-service) attack, Lurhq said.

The bot could also spread itself to other computers on a network, giving it worm-like characteristics. Microsoft, however, said the exploit code does not appear to be self-replicating at this point

The US DHS (Department of Homeland Security) highlighted the MS06-040 vulnerability a day after Microsoft issued a patch, saying it could affect government systems, private industry and critical infrastructure, as well as individual and home users.

Microsoft issued a total of 12 fixes this month on what's known as Patch Tuesday.