Police have charged seven people over allegedly fraudulent claims made to a sexual abuse compensation scheme that has paid out more than $1.3 billion.  

The alleged scam involved claims against the NSW Department of Education and the Department of Communities and Justice.  

Detectives say they caught claims farmers encouraging former prison inmates, young offenders and school students to file fraudulent claims for historical sexual abuse.  

They allege the seven coached people on making fake applications through law firms, and received up to $2200 for each referral.

Police say the seven stood to make $3.75 million but were caught before claims were paid.  

Investigators suspect “a significant portion” of the $1.3 billion of claims paid by the scheme were fraudulent.  

Detective Superintendent Gordon Arbinja says the allegedly fake claims uncovered appear to be “the tip of the iceberg” and he expects more arrests will follow.  

Those arrested on Wednesday included a 55-year-old man suspected of being the “syndicate head”.  

He faces 21 charges, including nine of dishonestly obtaining financial advantage by deception and eight of accessory before the fact to publish false material to obtain an advantage. He was refused bail by Parramatta Local Court.

Detectives also executed a search warrant at a Sydney law firm and seized several items.  

Andrew Gill, the Insurance Council of Australia’s counter-fraud CEO, said after the arrests that “wherever there is a pot of money, people will look for opportunity to enrich themselves”. 

“While I don't know any specifics of these matters, targeting and disrupting the organisers of fraudulent schemes is always the best way to achieve a greater strategic outcome,” he wrote on LinkedIn.

State insurer icare says it has worked “closely with other government departments to combat fraudulent claims”, including those from claims farming.

“Abuse claims are managed in compliance with government policies as well as a legislative framework that balances trauma-informed obligations with robust risk and liability assessments,” an icare spokesperson told insuranceNEWS.com.au.

The NSW government is expected to introduce laws banning claims farming of personal injury claims. Similar legislation was enacted in Queensland in 2022.