The IRA is suspected of involvement in a republican intelligence-gathering operation on police officers and their families in Belfast, according to security sources.
Republicans are believed to have penetrated the files of the Northern Ireland Police Fund, an organisation that helps injured officers and police widows. The fear is that personal details, such as the addresses of police families, may have been obtained by republican terrorists, possibly the IRA.
Two men have been arrested after police raids on the fund's headquarters in Belfast; other premises have been searched. One of the men has been released and the other is being held under anti-terrorist laws.
The possibility that the IRA may still be gathering information on the security forces was greeted with anger last night in political circles, where many had hoped the republicans had put such activities behind them. The discovery a year ago of republican political espionage at Stormont led to the suspension of the Northern Ireland Assembly.
The latest incident will also be a setback in the peace process, which is already in an uncertain state due to the recent electoral success of the Rev Ian Paisley's Democratic Unionist Party. The revelation will undoubtedly lessen the already slim chances of an accord between republicans and the Paisleyites, who during the election campaign repeatedly saidthe Stormont spying affair proved republicans could not be trusted.
The Stormont spying exercise, with last year's raid on a Belfast Special Branch office, led to hundreds of police officers moving house at great expense. A number of those charged in connection with those events are still awaiting trial. Police will be assessing whether the penetration of the police fund has put other officers at risk.
The Northern Ireland Police Fund was set up last year after the Patten report on policing in the province concluded that not enough had been done to help the families of officers who had been killed or injured. Many police widows were discovered to be living in relative isolation, having little contact with the authorities after the deaths of their husbands, some of whom had been killed years earlier.
The fund holds personal details of 600 serving and retired officers. Two official statements yesterday gave different impressions of the latest affair. Police said: "As part of an ongoing investigation into suspected criminal and terrorist offences police arrested two men yesterday."
The fund's chairman, Sir John Semple, a former head of the Northern Ireland Civil Service, said he was "advised that there are serious allegations, including financial irregularities, in respect of the police fund". He said two staff members were suspended.