Michael Wheatley, 55, who was given 13 life sentences in 2002 for a string of brutal raids on banks, failed to return to HMP Standford Hill open prison on the Isle of Sheppey, Kent.
Wheatley raided 13 building societies and banks over 10 months in 2001 and 2002 while on parole from a 27-year sentence for other robberies.
He earned his nickname after pistol-whipping victims, including a 73-year-old woman, during the raids.
Prisons Minister Jeremy Wright said there will be a full review of the case, including an assessment of the release on temporary licence (ROTL) process. Mr Wright said ROTL can be an important tool to help offenders reintegrate into communities but "it should not be an automatic right".
Ministers have said there will be a toughening up of the licence scheme so prisoners are subjected to stricter risk assessments and tagged.
Mr Wright said: "We are not prepared to see public safety compromised, the system has been too lax up to now and we are changing that. In future when prisoners are let out on temporary licence they will be tagged, more strictly risk assessed and tested in the community under strict conditions before being released.
"Temporary release can be an important tool in helping offenders reintegrate but it should not be an automatic right."
Conservative backbencher Philip Davies said whoever allowed Wheatley out of prison was "a berk".
The MP for Shipley in West Yorkshire said: "It is completely ludicrous a serving life sentence prisoner is even in an open prison where they can simply walk out.
"As far as I am concerned whoever allowed him to be in an open prison should be sacked, it is a complete disgrace."
Wheatley admitted 13 charges of robbery and 13 of possessing an imitation firearm in October 2002.