Word for "to direct attention away from"
Solution 1:
Underplayed?
The regulators' own report contains a clue to the fraud, which they not only ignored, but actively underplayed.
Underplay - To play down the importance of (something); to present less emphatically than usual (OED).
Solution 2:
Perhaps words like 'distract' or 'divert' would work? Something could 'divert attention away from' or 'distract from' the issue at hand.