The IRA, along with members of Sinn Fein, were behind what the European police agency Europol said was one of the biggest and most sophisticated counterfeiting operations ever uncovered in Europe.

Europol said that when gardai raided an underground bunker in Co Laois last Tuesday, enough ink and specialist paper was found to produce €200m (£166m) worth of €50 and €100 notes.

The operation may have already netted tens of millions for the IRA and Sinn Fein operators. The notes have been spreading across Europe in the past year or so, and are of very high quality.

They cannot be detected by the usual ultra-violet machines. They even had the same holograms used on the legitimate notes.

It is also understood an assault rifle was found at the scene.

It has been learned that those involved in the massive counterfeiting operation include a senior IRA man convicted of murdering a British soldier in Northern Ireland and who was a close associate of Gerry Adams, and three known and current members of Sinn Fein.

The IRA man, originally from west Belfast, was on the run from the authorities in Northern Ireland since the 1980s and he was secretly granted an official British royal pardon allowing him to return home.

The IRA man, aged in his 50s, has been heavily involved in criminal activity in the last decade since receiving his British royal pardon.

He has been arrested on several occasions by gardai and has paid a substantial amount of money in back tax to the Criminal Assets Bureau.

The operation leading to the discovery of the underground bunker near Borris-in-Ossory started when police across Europe began detecting the near-perfect notes.

An international operation was put in place stretching as far as Japan, where it is believed materials were sourced. It led to Europol contacting the gardai and the raid on the Co Laois bunker.

It is not known when the Provisional IRA began counterfeiting on such a large and professional scale. But security sources believe that it lost a huge amount of money it had invested with Lehman Brothers when the bank collapsed in September 2008.

In a statement, Europol described the Co Laois operation as “one of the most sophisticated money counterfeiting set-ups uncovered in Europe to date”.