Yes, the AI was wrong and output was blindly accepted. There's no evidence migration background was a good predictor of fraud. The government was warned multiple times what they were doing was both illigal and ineffective. And even if it was a predictor, 26000 people were wrongly labeled as fraudsters, causing personal bankruptcy (which is very bad in the Netherlands), evictions, divorces, children wrongfully being taken away from the families (1100!) and suicides.
All while systematically denying the issue, government officials that knowingly lied during public hearings and a complete inability to compensate those that were affected.
Don't drag "wokeness" into this discussion, it has nothing to do with it.