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The policy is designed to addresses childcare centre placement shortages and encourage parents to return to work. But the bar to running a centre is low – a working with children check and a relatively pro-forma approval from state and federal departments.

The scheme can be easily exploited with the joint connivance of carers and those sending their children to a centre. Or,to be more accurate,not sending their children to a centre.

In the investigation targeting the Point Cook families – all members of Melbourne's Somali community – police allege that the extent of care provided under the grandparent benefit scheme was grossly inflated. In just 18 months,almost $16 million in grandparent childcare benefits were claimed. Most of this money was allegedly for childcare never actually provided.

On Friday,federal agents swooped on another family day care network operating out of the Sydney suburb of Lakemba. This business involves dozens of day carers who have been recouping million in benefits for several years.

One of two carers who were arrested and charged with defrauding the family day care benefits scheme allegedly has links to an Islamic charity suspected by Lebanese authorities of funding terrorist group Islamic State.

Counter-terrorism agents are now examining whether the fraud has involved funds being sent overseas. No links to charities suspected of supporting terrorism are suggested in the Melbourne case.

The Melbourne and Sydney police operations,and a third inquiry last year that involved an alleged $4 million family day care fraud in Albury on the NSW border,raise the prospect that significant rorting may be going undetected. An official familiar with the federal police's efforts to police the scheme says he is staggered at how easily it is exploited. There are echoes of the Rudd government's pink batts fiasco.

"Anyone can set up as a day care provider. And you can make millions,"the official said. When federal police raided the Point Cook home in December,they seized two luxury cars and $1 million in bank accounts.

The federal government's response to the rorting has been new laws to ban a practice known as"child swapping",which involves multiple stay-at-home parents lying about looking after each other's children to claim benefits. Last year,analysis suggested $250 million may have been swindled from the family day care benefits scheme.

The government also launched Taskforce Integrity to crack down on welfare rorting. It involves federal police,Australian Crime Commission and departmental staff examining large data sets,tip-offs and conducting in-depth police investigations.

Counter-terrorist investigations overlap with this work given suspected local jihadists sometimes rely on welfare to fund travel overseas to join extremist groups or support charities.

Andrew Paterson,chief executive of the industry group,Family Day Care Australia,said the rorting of the industry using"child swapping"had exploded in the past two years but been curtailed by the recent changes.

"The Family Day Care sector has been operating for 40 years,and this type of behaviour has only been prevalent in the past couple of years. And before the law was changed,it was escalating,"he said.

Now,he hoped,the rort was safely put back to bed.

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