The INLA man asked a woman from the south Derry area to move to the Republic and open the brothel. The security forces have previously used informers to set up brothels in the north.

The establishments are used to gain intelligence on clients who are also open to blackmail. This is the first report of such an alleged venture in the Republic.

An INLA source said a 51-year-old south Derry man, who comes from a republican family, made a statement last week to the paramilitary group admitting he had worked as a police informer for a year.

The source said the married man claimed he was blackmailed into becoming an informer when he began an affair with a woman who was also dating a Police Service of Northern Ireland detective.

The INLA source said the man's activities came to light after the paramilitary group began investigating claims he had sexually assaulted two women.

The man had been visiting dissident republican prisoners in Portlaoise prison in what the INLA claim was an "intelligence-gathering mission".

The INLA source said the man had admitted that, under Special Branch instruction, he set up an INLA unit in Maghera, Co Derry, which was attempting to provoke loyalist violence.

The unit was responsible for several arson attacks on Orange halls and planned to arm itself by stealing legally-held guns from local farmhouses, the source claimed.

It is understood the man, whose name is known to the Sunday Tribune, was ordered out of the North by the INLA.

He had been an active republican for 30 years.