City of London Police said a claim for life insurance was made in May, and it was reported the mother had died in a car crash in Zanzibar.
Police said the woman was contacted in Canada by officers and asked to return to the UK.
The 45-year-old was arrested in Birmingham.
The woman and her son, 18, from Walsall, were questioned on suspicion of fraud by false representation and have both been bailed until April.
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The son's guardian, 24, from Walsall, was also interviewed under caution.
A mother and her son have been arrested on suspicion of faking her death so the family could make a £140,000 life insurance claim.