The woman, who used to work for the Care Quality Commission (CQC), was arrested on suspicion of pressuring care homes for the elderly to pay her money in return for favourable reports. According to City of London Police, care homes were "pressurised into paying fees for favourable inspection report".
She is also accused on money laundering through the care home system.
Louise Guss, director of governance and legal services at the CQC, said in a statement: "This inspector has failed the organisation, failed the providers who rely on us to act fairly and impartially, and - most importantly - failed in their responsibility to protect people who use services through identification of poor care.
"Having investigated allegations made to us about this inspector and found these were substantiated, we terminated their employment with immediate effect and referred the matter to the police."
The CQC said that it had a “zero tolerance” attitude towards this kind of behaviour, and that it always expected “extremely high standards” from all of the inspectors on their payroll.