The cops made a blunder
The two police officers made a serious mistake when they are initially investigating the apparent murder Billy claims to have witnessed. Had they asked to see the blonde woman alive and well as proof that the murder wasn't real, the two Russian men would have been exposed. I guess they felt no other proof was necessarry after seeing Andy survive the same kind of thing. On another note, that guy should have been shot as soon as he started fake-stabbing Andy.
Being inconsistent is better than being consistently bad.