Australian authorities are probing a major migration scam and scrutinising the documents of thousands of overseas students after they identified agents involved in providing fake documents to foreigners.

Around 10 registered migration agents were reportedly involved in an organised crime of providing fake documents to foreign students to enable them acquire permanent residency.

These agents have hired a team of seven unregistered "facilitators" to sell false education and work experience documents to international students who were applying for permanent residency, a report in 'The Age' newspaper said.

In what is called the "template scam," agents buy letterheads and blank certificates from dodgy trade schools and workplaces for Australian dollars 1000 each, then facilitators fill them out and sell them to students for 5000 to 15,000 Australian dollars.

Immigration department and federal police were investigating the issue, the paper said.

The size and complexity of the scam was "without precedent," it quoted an immigration spokesman as saying.

A federal source said facilitators did the "dirty work".

"If this was the drug trade, you would call them mules," he said.

Investigators said 2500 international students have used fake documents in Melbourne this year. Up to 5000 visas could face cancellation within six months as they were granted on illegal paperwork.

The visa holders would be deported or detained, the report said.

Investigators believe a Chinese-born businessman was involved in the scam, which also worked as an identity crime racket to sell students fake passports and birth certificates, earning 1.5 million dollars a year.

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