According to reports, British spy agency GCHQ intercepted webcam images from millions of Yahoo users around the world.
The operation, called Optic Nerve and aided by the US National Security Agency, is alleged to have stored images between 2008 and 2010.
The report, originating from documents leaked by whistleblower Ed Snowden, read: "Unfortunately … it would appear that a surprising number of people use webcam conversations to show intimate parts of their body to the other person.
"Also, the fact that the Yahoo software allows more than one person to view a webcam stream without necessarily sending a reciprocal stream means that it appears sometimes to be used for broadcasting pornography."
In a statement Yahoo said: "We were not aware of nor would we condone this reported activity.
"This report, if true, represents a whole new level of violation of our users' privacy that is completely unacceptable and we strongly call on the world's governments to reform surveillance law consistent with the principles we outlined in December.
"We are committed to preserving our users' trust and security and continue our efforts to expand encryption across all of our services."
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