A former IRA man turned smuggling boss hired three scientists in a desperate bid to crack a new diesel marker that was introduced on both sides of the Irish border.
However, the south Armagh smugglers were still unable to remove the marker, and, according to garda and customs sources, diesel washing and smuggling – which has made multi-millionaires of many former terrorists – is now coming to an end.
The fuel smugglers already had one scientist working for them in fuel laundering and had been able to overcome all previous attempts to stop the washing and smuggling of "green" and "red" diesel.
They hired a further two scientists this year, but they have been unable to crack the new colourless marker, which is understood to contain a harmless radioactive element.
The smugglers previously used their in-house chemist to help them reduce the sulphur content in the "washed" diesel – which damaged car engines and put many people off buying the cheaper fuel from outlets controlled by the smugglers.
The new marker is manufactured by the multinational Dow Chemical Company and has been in use for years in South America, where fuel laundering and smuggling was rife.
It was introduced simultaneously in the Republic and Northern Ireland in February.
Sources say the smugglers appeared to have had inside information that the new marker was on the way and spent the previous months building up stocks of green diesel. But these are now believed to be running low.
The main players have been turning increasingly to tobacco smuggling, and south Armagh is reputed to be one of the Western world's centres for the illicit trade in tobacco, supplying both the Irish and British markets.
The fuel smugglers have also been looking for other revenue sources and last year became involved in smuggling over-quota milk.
They are expected to venture back into this racket over the summer as dairy farmers meet and pass their quotas. However, the EU quotas end on March 31 next, so this too will be coming to an end.
Since the introduction of the new colourless marker, customs officials have been monitoring the movement of diesel to "pop-up" fuel outlets – many of which are expected to be raided in coming months. However, according to garda sources, the smugglers are aware of this.
After decades of fuel smuggling, the major millionaires involved are said to be salting their money away in property, particularly in hotels and pubs, as well as in offshore investments.
Gardai are aware of a number of significant property investments made in the past two years by the ex-IRA men.
Garda sources say they believe that the smugglers were allowed to continue in their rackets as part of a secret deal in order to stop them from returning to terrorism after the IRA ceasefire in 1997.
The main smugglers operate in the open, and although there have been hundreds of raids on 'washing' plants in the south Armagh area, none of the major players have been captured.
The diesel laundering created a massive environmental problem in the border area from the dumping of the carcinogenic sludge by-product. It has cost border county councils such as Louth and Monaghan tens of millions of euro to dispose of the hazardous sludge.
The new marker was officially launched in February after years of research by both customs services into ways of defeating the republican smugglers.
"Rigorous" tests were carried out and the marker was found to be highly resistant to known laundering techniques. It was implemented following consultation with the oil industry and other affected sectors, and is being used alongside the current marker mix.
Launching the new marker, the Republic's Revenue chairman Josephine Feehily said: "Fuel laundering has many detrimental consequences, not least its significant impact on the Exchequer.
"While we have introduced many initiatives in recent years to tackle this problem, including more rigorous supply chain controls as well as robust enforcement actions, the introduction of the new fuel marker is an important element of our strategy in tackling this crime."
Since last year, Irish Revenue directed that all licensed fuel traders be required to make electronic returns of their monthly fuel transactions. These "supply chain" control measures have also made it much more difficult for the smugglers to source marked fuel and sources say it is now virtually impossible for them to source green diesel.
Types of fuel fraud include:
Laundering – removing dyes and markers to make identification of a non-road fuel harder.
Mixing – combining oils to make an illegal road fuel, for example kerosene or tied oils with lubrication or other oils.
Misuse – illegally using red diesel in road vehicles when it is intended to be used off-road.
Smuggling – failing to declare or misdescribing consignments of oils dispatched from within and outside the EU.
Fuel scams Q&A
Q What exactly is fuel laundering?
A For economic reasons farmers and some industries can buy diesel at a considerably cheaper rate than other road users. Laundered fuel is red or green diesel which has been filtered through chemicals or acids in order to remove the government markers. Green diesel is the Republic of Ireland equivalent of the UK's red diesel.
Q And how exactly is it done?
A The dye is relatively easy to remove using a bleaching agent – the most recent method of removing the dye is to use silicon dioxide, which can render the fuel colourless in two hours. The silicon dioxide is put into a tank of green diesel and a compressor is used to pump the air through. Previously coal and even cat litter has been used to filter the dye out.
Q Who is involved in fuel laundering?
A Dissident republican paramilitaries are heavily involved. PSNI Chief Constable Matt Baggott said counter-terrorism efforts were intertwined with investigations into organised crime. UUP MLA Danny Kennedy, who represents parts of South Armagh, said: "They (republican criminals) are dumping the diesel where once they were dumping the bodies."
Q What is the cost to the public purse?
A In Northern Ireland, the HMRC suggests the UK government lost about £70m in revenue in 2012.
Q What is the impact for motorists?
A The fuel can be purchased for around £1.11 per litre, much cheaper than legitimate fuel. But it can ruin the engines of cars.
Q What is the environmental impact?
A Almost half-a-million pounds was spent in just one year cleaning up waste from fuel laundering in Northern Ireland. A toxic sludge is produced in the laundering process to make no-duty paid fuel harder to detect. Just prior to his departure, then Environment Minister Alex Attwood said the agency responsible for tackling it has been ineffective.