The Government has begun a large-scale undercover operation to highlight the link between fraudulent driving licences and terrorism.

Recent investigations by The Sunday Telegraph found that more than 3,400 illegal tests have occurred in Britain since 2004, with more than 770 arrests by March this year.

A spokesman for the Fraud & Integrity unit at the Driving Standards Agency claims the criminality is “far reaching” and that “clear links to terrorist activity” have been found.  

The scam involves lookalike drivers sitting tests for investors. The lookalikes are paid up to £1,500 to sit the tests and then pass on the approved licence. The licences then allow false identities to be created, leading to unlawful benefit claims and fresh bank accounts for terrorists.

Speaking in The Sunday Telegraph, a government official confirmed the dangers: "Intelligence suggests some of the proceeds - millions of pounds in some cases - have been transferred overseas and used in paramilitary activities."

Aidan Carr, partner at Rowlands Solicitors LLP, commented "This illustrates the problem with switching to a wholly document based identity system such as the Government proposed identity cards - once a false document is created the "owner" is virtually guaranteed facilities such as bank accounts and can perpetrate fraud with impunity.

"There needs to be a system of cross referencing and verification."