There's no slacking and avoiding an active daily job search unless you commit fraud. They audit your claims to a certain extent to look for fraud.

I'm not saying people don't abuse the system. I'm certain they do.
This is an interesting use of the word "fraud". It implies I'm a fraudster. I have to exaggerate my job search in order to meet the requirements. Am I committing fraud? Well no, because the only part where I actually sign is the part where I say I've done no work since I last signed. If I lie when I make that declaration, then I am committing fraud. That's because it's made clear where you sign that providing false information is fraud. To say one applied for a job when one didn't, that is not fraud, not unless someone actually makes you sign a declaration making it clear that lying will be fraud. Fraud is not just lying to obtain money, if that was the case then everyone who fills in their time sheet at work to say they worked until 5pm when actually they stopped working at 4.50 then dicked about on facebook for ten minutes is committing fraud, because they are obtaining money by means of deception. Would the employer pay them for the final ten minutes if the employee was honest about what he did as the day closed out?

In law, fraud is deliberate deception to secure unfair or unlawful gain. Fraud is both a civil wrong (i.e., a fraud victim may sue the fraud perpetrator to avoid the fraud and/or recover monetary compensation) and a criminal wrong (i.e., a fraud perpetrator may be prosecuted and imprisoned by governmental authorities).
Here's the definition of fraud, according to google. Note the use of the words "unfair" or "unlawful". The money you claim as a result of your deception, if you lie about your job search efforts, is neither unfair nor unlawful. It's a basic right.

The day lying about job search actually becomes criminal fraud is a very worrying day indeed. That's a lot of people at the bottom of the food chain who are now at risk of going to prison.