The extended family said by ministers to include more than 10 members is facing prosecution over allegations for falsely claiming pounds 600,000 in welfare benefits, including housing benefit. It is also alleged to have defrauded building societies of pounds 1.2m in a linked fraud involving mortgage claims.
They were caught by a pilot local government task-force set up to target organised housing benefit fraud across the capital, an initiative which may be copied across the country.
A social security investigator spotted that they were making a large number of claims for family credit.
When challenged, the family dropped the claims but they were pursued and a complicated network of organised fraud using aliases was uncovered.
Scotland Yard said five people, three women in their 30s and two men, both aged 37, were arrested during raids on four addresses in Stoke Newington, north London, last month. A sixth man was arrested the same night at Gatwick airport as he returned from the United States.
The operation was carried out jointly by the London Organised Fraud Investigation Team, set up 18 months ago to examine bogus claims in the capital, and Scotland Yard's Fraud Squad.
The family, which cannot be named because legal action is pending, were released on police bail.
Frank Field, the social security minister, used the family yesterday as an example of the new approach he is spearheading in tackling fraud in the welfare system, which could run to millions of pounds a year.
The new 20-strong unit, which includes former police officers, has already uncovered evidence that benefit fraud is being carried out by organised criminals and in some cases involves national networks of bogus claimants. In the past, fraudsters were able to avoid checks on multiple claims because local authorities had no way of cross-checking claims across the capital.
Mr Field, a former chairman of a Commons select committee on social security, which called for action against organised welfare fraud, was recently told by Tony Blair to take over responsibility for tackling fraud from John Denham, a junior social security minister.
Fraud investigation officers are now using powers, from last year's Social Security Administration (Fraud) Act, which allow small-scale offenders to avoid prosecution by agreeing to repay overpaid benefit, plus an "administrative penalty" - typically 30 per cent of the amount defrauded.
Both the overpayment and the fine are deducted directly from future benefits. Previously, criminal prosecution was the only available sanction.
Mr Field stressed that although the fines system was a useful way of keeping small-time offenders out of the "rigmarole" of the courts system, prosecution remained an option for big-time offenders.
"No one need think that the use of new administrative penalties for benefit fraud will mean that we will not continue to take tough action against fraudsters who make organised attacks on the system," warned Mr Field.
"We want to show that we are not obsessed with individual claimants, but are addressing the sustained attack the department is under from organised criminals. The task of government is to be vigilant and try to get counter- fraud techniques in front of where the able gangs are.
"It's important that it goes back into the system that a new age has started."Reuse content