The IRA has launched an internal investigation into the existence of an alleged MI6 agent codenamed 'J118', The Observer has learnt.

Martin McGuinness, Sinn Fein's chief negotiator and former IRA commanding officer, has publicly denied he is the agent. The Mid Ulster MP was responding to allegations from former British Army intelligence officer Martin Ingram who claimed McGuinness was MI6's top asset inside the IRA. 'Regardless of the validity of this claim, it is IRA standard operating procedure to investigate,' a top republican source said this weekend.

'The IRA's Derry Brigade has been riddled with informers in the past and any allegation, especially by someone like Ingram, has to be looked at. No one is immune from suspicion, even if the vast majority of republicans don't believe these particular allegations,' he added.

McGuinness dismissed Ingram's claim this week, saying he was 'one million per cent confident' that the allegations would be proved to be false.

Yesterday Sinn Fein president Gerry Adams rejected the allegations and claimed they were 'dirty tricks' being played by ex-members of the now re-formed Royal Ulster Constabulary and disgruntled British intelligence officers.

However, some republicans point to Ingram's track record in unmasking informants inside both the republican movement and loyalist terror groups.

Ingram, a former NCO in the army's highly controversial Force Research Unit, revealed the existence of 'Stakeknife', the British agent who was running the IRA's internal security unit. Freddie Scappaticci initially denied he was 'Stakeknife', a denial backed up by senior Sinn Fein figures. Eighteen months later, however, republicans accepted the man who was charged with catching informers in the IRA's ranks was himself an informer.

Ingram's allegations against McGuinness centre on the existence of a transcript of a taped conversation he claims is between the top republican and his MI6 handler. Doubts have been cast on the validity of the document, but Ingram insisted this weekend the transcript was genuine and the index number of the MI6 agent, 'J118', was the one the security services attributed to McGuinness.

In the brief transcript, an IRA commander tells the MI6 handler about a forthcoming attack at two border checkpoints, one on the Derry/Donegal frontier, the other in South Armagh, on 24 October 1990. Five soldiers and a civilian were killed in the Derry attack.

In the same document the IRA commander discussed the head of the Provos' 'Northern Command', the man who intended to launch a series of so-called 'human bomb' attacks on British Army installations across Northern Ireland.

According to the document the MI6 officer encourages his informer 'to push this along as quickly as possible' - in other words, allow the attack to go ahead.