Immigrants are using bogus PPS numbers to obtain work permits and open bank accounts to lodge welfare cheques, the Dail's finance watchdog heard today.
The Department of Social and Family Affairs said it issued PPS numbers last year to 37,000 non-EU applicants, who were the biggest culprits.
A report by Comptroller & Auditor General John Purcell on the Department's 2004 accounts warned identity fraud was a significant problem.
Mr Purcell told the Dail's Public Accounts Committee: "As we move into an e-government environment, PPS numbers will be used to access a whole range of public services and the system is open to abuse."
The Department's Secretary General John Hynes said there was a problem with non-EU people trying to circumvent work permits legislation with bogus documentation.
"We would like to see more checks. The fact that they have a PPS doesn't meant that they are the person to whom it was issued," he told the committee.
However the Department said it was out-witting fraudsters by its new special investigation unit and using ultra-violet equipment in local offices to check the authenticity of documentation.
It also liaises with foreign embassies and the Garda National Immigration Bureau to check the backgrounds of PPS applicants.
The Department said it is currently carrying out a fraud survey on PPS numbers which will be completed in late April. Kilkenny TD John McGuinness said: "There is evidence there to say that identity fraud is a significant problem. It is a serious issue and we don't seem to have caught onto it quickly enough."
Mr Hynes said he was satisfied that the system was now tight enough to deter would-be fraudsters.
Mr Hynes said there were 271,000 PPS numbers issued in 2005 including 64,600 to Poles, 18,680 to Lithuanians, 14,000 to Britons, 9,300 to Slovakians and 9,300 to Latvians.
The PAC heard that over 450 welfare fraud cases were forwarded to the Chief Solicitor's Office in 2004.
Socialist TD Joe Higgins said that 14 employers were fined €7,000 in 2004 for PRSI fraud. "This isn't a deterrent. It is an invitation to take the risk for most people because the fine is so low," he said.
The Dail Committee also heard that up to €2 million was lost in the post by the Department during a three-and-a-year-period up to 2004.
Mr Hynes said the money was mislaid while in transit from social welfare offices to post offices for payment, but efforts were ongoing to recover it.
Committee member Tom Hayes accused welfare inspectors of deliberately targeting pensioners, as it had been an issue in his South Tipperary constituency. But Mr Hynes replied: "Inspectors certainly don't go around causing difficulties for older people."