Scotland Yard is investigating claims security workers were paid by convicts to deliberately fit electronic ankle tags loosely.
Staff at Capita, which is contracted to run the Government's Electronic Monitoring Service (EMS), were allegedly paid £400 a time to help at least 32 offenders beat their court-imposed curfews, The Sun reported.
The Metropolitan Police said 14 people, including three current and former EMS workers, have been arrested in connection with a series of offences involving the monitoring of offenders.
Capita won the six-year £400 million contract for electronically tagging criminals in 2014 after security firms G4S and Serco became embroiled in an overcharging scandal.
The Ministry of Justice (MoJ) said it was "urgently" investigating the claims.
Scotland Yard said a 46-year-old man, a former EMS employee, was arrested in Romford, Essex, on January 3 on suspicion of conspiracy to pervert the course of justice and theft of tagging equipment.
A 45-year-old man from Barking, Essex, and 57-year-old woman from Romford - both current employees - were arrested on January 18 on suspicion of conspiracy to pervert the course of justice.
A further 11 people were arrested in connection with the investigation in January, Metropolitan Police confirmed.
A spokesman for the EMS said: "We have a zero tolerance policy against any of our employees who act in any way to undermine the robustness of the electronic monitoring service.
"The small number of employees being investigated regarding this isolated issue were swiftly taken off duties and we are closely co-operating with the Metropolitan Police Service."
A Met spokesman said: "Detectives in Newham borough are investigating a series of offences involving the monitoring of offenders.
"Police had become aware that offender monitoring equipment was being used inappropriately."
A spokesman for the MoJ said: "Public protection is our priority. We are urgently investigating and working closely with the police."
All 14 suspects have been bailed to dates in early April and inquiries are ongoing, police said.