Benefit officials have told the BBC they fear that as much as £1.5bn may have been lost in fraudulent claims for Universal Credit in recent weeks.
Huge demand for the benefit has seen some processes relaxed to ensure the majority of claims are paid quickly.
But officials believe that some organised crime groups – as well as individuals – may have taken advantage of the system.
The DWP said it monitors benefit fraud “very closely”.
More than 1.5 million people applied for Universal Credit over the course of one four week period up to 9 April.
Over that period, applications were running at six times normal levels.
To process the claims quickly, and make sure people received help, a number of processes were relaxed.
Identity checks were processed online, rather than face-to-face, and some information was taken on trust, such as the cost of rent and whether someone had been self-employed.
While officials are keen to emphasise that the vast majority of claims came from genuine applicants, especially in the initial surge, they fear the looser checks have opened the door to individuals and some organised crime groups exploiting the system.
The government is aware of the concerns and is investigating the extent of the problem, but the BBC has been told that initial calculations indicate that as much as £1.5bn has been wrongly been paid out.
While fraud investigators will attempt to recoup all the money, one official said the concern was the hundreds of millions of pounds that had been paid out as advance payments, sometimes on the day, and that it would be far harder to get that money back as the recipients often couldn’t be traced.
One of the original aims of Universal Credit was to cut £1bn from the welfare budget by reducing fraud and error.
But official figures published last week showed the problems are increasing on the benefit.
While the level of overall fraud in the welfare system was 1.4%, on Universal Credit it was 7.6%, a figure that increased by 27% in one year.
Last summer, we highlighted that criminals were exploiting loopholes in the Universal Credit system for paying advance payments to claimants.
In March, the National Audit Office estimated the government may have lost up to £150m due to the problem.
In a statement the Department for Work and Pensions told the BBC: “Thanks to the extraordinary efforts of staff, since mid-March we’ve managed to process more than two million new claims for Universal Credit and pay 970,000 advances, getting hundreds of millions of pounds into the accounts of those in urgent need within days.
“We continue to monitor benefit fraud very closely and will relentlessly pursue the minority attempting to abuse the system using the full range of available powers, including prosecution through the courts.
“Our detection systems make use of increasingly sophisticated techniques to identify discrepancies and thwart those seeking to rip-off taxpayers.”