My first google search "harsh penalty deter crime" had this as the top:
>Increasing the severity of punishment does little to deter crime. Laws and policies designed to deter crime by focusing mainly on increasing the severity of punishment are ineffective partly because criminals know little about the sanctions for specific crimes.
Ignoring the fact that such a system would be ripe for abuse and retaliatory behavior, just accidentally convicting an innocent person would absolutely ruin their life.
Getting wrongly convicted is already a huge tragedy. Now you'd be handing out life sentences basically.
Let's be real, it's not the rich people who tend to engage in benefits fraud and I'd argue most people who do this are in desperate situations.
There's a long list of examples of "fraud"; like many crimes it's a scale.