Watson said the ICC's refusal to suspend the Pakistan players implicated in the sport's latest betting scandal called into question the world body's ability or willingness to catch -fixers.
He said it was a disgrace to cricket that an English newspaper had to bring to light the most recent scandal and the reported involvement of Pakistan players with bookmakers might be "the tip of the iceberg".
British newspaper The News of the World reported on Sunday that Pakistan's bowlers were paid to deliberately bowl no-balls on Thursday's opening day of the fourth test against England at Lord's. Captain Salman Butt and opening bowlers Mohammad Amir and Mohammad Asif and wicketkeeper Kamran Akmal were implicated in the story.
Asif, Amir and Butt had their mobile phones confiscated by police, who also searched hotel rooms and questioned players late Saturday as part of an investigation also involving the International Cricket Council's Anti-Corruption and Security Unit.
"The ICC anti-corruption unit is not really working," Watson said. "That's totally to do with the ICC, so they really need to step in and really get to the bottom of it."
Watson suggested that the ICC may not want to investigate match fixing because it runs so deep.
"They need to get to the bottom of it as soon as possible because we don't want it to affect the game anymore than it already has," he added.
On Tuesday, ICC chief executive Haroon Lorgat called match-fixing in cricket "sad and disappointing" but denied that his organization has allowed the sport to be corrupted and said players have to help in preventing more cases.
"We have identified corrupt individuals and advised players to stay away from them," Lorgat said in South Africa. "We need cooperation from the players. They must listen to us and also have discipline."
Lorgat, also a South African, said the ICC was taking action to fight the problem.
"We have a lot of measures in place," Lorgat said.
"These measures work by and large. There have been many approaches (to players) reported and followed up," he continued. "Betting activities will continue, our concern is if players and match officials are involved. Whatever happens outside the game is not our interest, but we will do anything possible to keep it out of the game."
Watson said he feared fans may desert the game in the wake of the latest revelations and worried that all matches might be tainted by the suspicion of match-fixing. "People might turn away from cricket because they don't know what they are seeing is actually the true facts of cricket or a general game of sport."
Watson said he was distressed that Australia's win over Pakistan at the Sydney Cricket Ground last January - one of the highlights of his career - had now been tarnished.
"It is one of the most special days in my career," he said. "But now we hear about what could have happened."
