It was not only perceived fraud by minorities:
https://en.wikipedia.org/wiki/Dutch_childcare_benefits_scand...
https://en.wikipedia.org/wiki/Dutch_childcare_benefits_scand...
Most practitioners can tell you that naive anti-crime initiatives often end up targeting minorities. In many Western countries, minorities are significantly over-represented in crime and jail statistics (compared to the general population). Is that ipso facto racism or racial profiling?
The little bit of fraud that was uncovered did not justify declaring a very large fraction of the Dutch population as fraudulent. I'm kind of surprised that your takeaway is exactly of the kind that has been proven to be utterly wrong and counterproductive during this whole affair. Yes, what you are advocating for is racism and racial profiling.
Tech by itself can be bad enough, tech wielded to achieve nebulous goals without any consideration for the human side of the effects is outright dangerous.