Tens of thousands of European Union citizens may have been incorrectly paid benefit payments following a Home Office data error.
The issue has been raised by the Independent Monitoring Authority (IMA), a body set up following Brexit, who has warned over 140,000 people could be affected.
The Home Office was said to have wrote to individuals who had been refused EU Settled Status, but it did not immediately update its eVisas database.
The IMA said this meant people who had been refused continued to be categorised internally as their applications being "pending".
The status of their application was left as "pending" because it was required by the Brexit withdrawal agreement to protect the rights of people who were refused settled status but immediately appealed.
The Home Office updated the "refused" statuses on the eVisa database on January 18.
The IMA said thousands of people who did not immediately appeal the refusal continued to receive things such as benefits and access to public funds to that they were not entitled to.
Around 141,000 EU citizens who applied for EU Settled status were refused between June 2021 and April 2022, according to PoliticsHome, which first reported on this case.
Government departments that could also be impacted by this include the Department for Levelling Up, Housing & Communities and the Department for Health & Social Care.
The IMA said it was "concerned" about the impact this could have on those affected and has written to the Home Office to "seek clarity" on the steps that have already been taken.
The Home Office has confirmed to the IMA that this issue only affects individuals who received a refusal decision between June 27 2021 and April 19 2022.
There has been no confirmation on how many people may have been impacted or how much money is estimated to have been wrongly paid out.
The IMA said anyone who has been granted pre-settled or settled status is unaffected, and they do not need to take any action.
The IMA has also written to the Home Office to "clarify" what steps have been taken to remedy the issue.
The IMA said: "We are seeking assurance that the EUSS digital system is fit for purpose, maintained and audited to reflect accurate digital statuses, and accurately available on demand for all eligible citizens.
"We will consider the response of the Home Office to our request for information before deciding on what next steps we may take.”
A Government spokesperson initially told PoliticsHome: "Millions have successfully applied to the EU Settlement Scheme and are using their status to prove their rights.
“Where someone has been refused status, it's right that the Government takes action to correct their eVisa to reflect this status, to ensure that they only receive public funds and benefits that they are entitled to.”
On the issue of EU citizens having received benefits, a Government spokesperson told the Daily Mirror: “The online digital status for some EU Settlement Scheme applicants who were refused status has been updated in line with the decision taken on their application, which had already been communicated to the individuals concerned.
“We are working across government and with the EU and member states to understand any further implications and to ensure the situation is managed quickly and pragmatically.”
