The senior Smithwick Tribunal counsel revealed the two murdered RUC officers at the centre of the inquiry had travelled to Co Louth to discuss a possible joint RUC/Garda operation on lands owned by prominent republican Thomas 'Slab' Murphy.
Mary Laverty said that on that March morning in 1989, just hours before the ambush, Chief Superintendent Harry Breen claimed a Dundalk-based garda officer was receiving payments from Murphy.
After the killings, Mr Breen's staff officer Alan Mains passed the information on to senior colleagues. But Ms Laverty said the force did not pursue the allegation.
Mr Buchanan also expressed concern about an officer based in Dundalk to a high-ranking garda officer. The garda claimed he relayed the information to a senior officer at garda headquarters.
The same officer also told the tribunal that he subsequently received intelligence of a threat to Mr Buchanan's life six months before his death.
Ms Laverty claimed there was an unwillingness by police forces on both sides of the border to "get to the heart" of the theory of a mole within the gardai.
She said the inquiry's team was repeatedly told by former RUC officers that there was a wariness among officers in the 1980s about travelling to Dundalk as it was a "subversive heartland".
"For others, the wariness extended to one's dealings with Garda officers and, in some instances, particular named officers," the counsel said. "Some said they were put on their guard by RUC colleagues, others that they were put on guard by members of An Garda Siochana."
The tribunal will sit again tomorrow.