The inner sanctum of the Bank of England was penetrated by a “powerful criminal network” linked to money laundering, terrorism, and contract killings, according to explosive intelligence that the police and MI5 tried to keep secret.

The details of the covert operation – which uncovered a suspected gangland plot so audacious detectives feared it could “destabilise” the British economy – are revealed for the first time in secret police files seen by BuzzFeed News and interviews with several well-placed sources.

The infiltration was discovered when detectives tapped the mobile phone of a Ferrari-driving businessman suspected of laundering money “on a vast scale” for organised crime gangs and reported hearing him receiving secrets from inside the Bank.

The major national security breach has been kept tightly under wraps by police chiefs and spies at MI5 for more than 16 years, shielding those implicated in the highly embarrassing scandal from public, parliamentary, and judicial scrutiny.

Although police warned senior bankers that a mole was passing inside information to a businessman connected to organised crime, the leaker was never identified, no one was sacked, and the businessman remains at large.

The Bank of England is now facing serious questions about how gangsters gleaned Britain’s most closely guarded financial secrets and how the public can be confident no such breach will occur again.

In 1998, as part of a major probe codenamed Operation Beregon, the detectives reported that they had eavesdropped on a high-rolling young stockmarket speculator receiving highly sensitive information about the bank’s monetary policy committee (MPC).

The committee meets in private each month to set Britain’s base rate of interest, which affects every aspect of the country’s economy, and the confidentiality of its deliberations is sacrosanct. Policymakers are made to sign a “declaration of secrecy” and are subject to “strict purdah rules” before decisions about interest rate changes are announced publicly. It is not suggested that the leak came from a member of the MPC.

But the businessman was believed to be exploiting a sexual relationship with the wife of a Bank of England insider to garner tip-offs about upcoming changes that could be used to gamble on the financial markets.

The threat to national security was deemed so severe that the investigation was swiftly taken over by spies at MI5, and the affair has remained a closely guarded secret for years.

A Bank of England source confirmed that in 1998 it was alerted to sensitive police intelligence that “two people were talking about inside access to the Bank’s information”.

The source said: “Leaking monetary policy stuff would have been, and still is, a hanging offence,” and an immediate internal inquiry was launched. But it failed to identify where the leak was coming from, so no action was taken and the case was closed.

However, some details of Operation Beregon are known to be contained in legal documents filed at the High Court last year by the lawyers of a former senior detective involved in the investigation who is now suing Scotland Yard.

The claim also contains other allegations of widespread police and political corruption. Lawyers acting for the Metropolitan police have successfully argued that the whole file should be sealed from public view to protect the safety of its officers and their methodology in fighting organised crime.

The Yard was granted a rare secrecy order by the High Court in October 2014, and although it was rescinded at a hearing on 20 July this year, the file has not yet been made available to the public.

But today BuzzFeed News lifts the lid on a cache of leaked police files and extensive interviews with police sources to give the first full account of Operation Beregon.

The London-based businessman at the centre of the investigation still cannot currently be identified for legal reasons but is referred to in this story as “The Suit”. He denies ever having laundered money or operated as a front for organised crime figures, and says he never received or acted upon inside information from the Bank of England. The allegations, his lawyers said, were “without foundation and appear to have been based on the unlawful disclosure of telephone interception material”.

The Beregon files seen by BuzzFeed News draw upon “a vast amount of intelligence” detailing his suspected links to notorious gang bosses including the north London crime lord Terry Adams. They also reveal The Suit’s suspected involvement in drug trafficking linked to international terrorism. His criminal associates were also suspected of involvement in contract killings in Britain and abroad.

The files also document the tapping of his mobile phone that allowed detectives to listen in on his calls with a coterie of lovers across London. One of them, sources say, was believed to be the wife of the Bank of England insider.

A source with knowledge of the operation said: “Organised crime’s infiltration of the City of London and financial services industry has long been a concern. Intelligence such as this was a real risk to the economic well-being of the UK and shouldn't have been suppressed.”

In January 1998, an intense intelligence-gathering operation with three targets was taken over from Scotland Yard by detectives from the newly formed National Crime Squad.

Police files show that two 51-year-old east London gangsters and The Suit, in his early thirties, were suspected of being “the heads of an organised and powerful criminal network”. Internal documents described Operation Beregon as “a pro-active investigation … into the activities of criminals of the highest echelon”.

The targets were, the report said, “not only involved with numerous criminal gangs within the United Kingdom but also four separatist terrorist groups across the world and criminal organisations including the ‘mafia’ and the most powerful Dutch criminal organisations”.

Target 1 was identified as "The Head” of the trio and Target 2 was deemed “The Criminal Mind”. The pair were known to the police as career villains with convictions going back many years and were suspected of involvement in the supply of drugs and firearms to “criminals and terrorists”, including “8 shipments of machine guns, grenades and semtex” to the Provisional IRA, as well as having been linked to gangland assassinations.

The Suit, meanwhile, was believed to be “the organisation’s front” in the straight world of business and finance. Detectives noted: “He launders money on a vast scale.”

Detectives at Operation Bergon linked The Suit to a range of expensive cars including a red Ferrari, a black Porsche, a silver Mercedes, an Aston Martin, and a Bentley Azure. His lawyers told BuzzFeed News that he “likes luxury cars” and had owned these vehicles.

Detectives also found that The Suit owned “a number of properties in and around the west end of London and Essex area [and] a number of girlfriends at various premises”.

This was a man of the most expensive tastes, but although he had directorships in a variety of telecoms companies, his extravagant spending vastly exceeded any legitimate earnings — leading detectives to believe he was living the high life on dirty money.

The detectives noted that The Suit sometimes lived in Dubai and was believed to have links with Iran, and that he had been a “ghost” in the tax system for many years until reaching a settlement with the Inland Revenue just before Operation Beregon began.

An intelligence report noted: “He appears to be the weak link leading to an opulent lifestyle with no apparent means or income.”

He was strongly suspected of laundering the dirty millions being raked in by his criminal associates, and the detectives wanted to follow the money. In February 1998, they applied for permission to tap his phone. Soon Operation Beregon was eavesdropping on The Suit’s conversations with lovers, businessmen, and criminal conspirators.

One intriguing name that cropped up repeatedly was someone The Suit referred to as “Uncle”. Detectives would later establish that this was code for Terry Adams, the head of north London’s most feared organised crime gang. The Adams family, or “A-Team”, had become Britain’s foremost criminal organisation by the late 1990s, suspected of major drug trafficking, fraud, and several unsolved gangland executions.

Terry Adams and his two brothers, Patrick and Tommy, needed “enablers” – professional front people in the “straight” worlds of finance, law, and property – to launder their dirty cash and distance them from their assets.

Police documents show that the Adams brothers typically cleaned their criminal proceeds through the arms-length ownership of properties, clubs, and bars in Islington and the West End, where cash is king. Other criminals would come to them for permission to do business on their patch in return for a cut, and the Adams name was also a franchise to be leased to those with a good scam. A senior police source who investigated the family likened the set-up to “a conveyor belt of criminal opportunities” from which they took “a corner”.

Solly Nahome was the family’s chief money launderer. He operated from a jeweller’s and a front company called Pussy Galore in Hatton Garden where he “koshered up” millions of pounds in dirty money by making legitimate investments for the family.

The police suspected that The Suit’s knowledge and contacts in the booming financial markets offered Terry Adams a different entrée into the City. Then, in November 1998, Nahome was assassinated on his north London doorstep, and The Suit appeared to be in pole position to take his place as chief launderer to the Adams family.

The Suit’s lawyers told BuzzFeed News that he had “never had any personal relationship or business dealings with Terry Adams”, but later acknowledged that he had met the crime boss on three occasions and knew Nahome “through his shop in Hatton Garden at which [he] bought and sold watches and jewellery”.

In the wake of Nahome’s assasination, detectives at Operation Beregon were desperate for intelligence on who would strike such a key associate of the Adams brothers. Permission was granted to bug a business premises in Essex on the grounds that it would provide good intelligence on what was happening inside the crime family and possible leads on the murder.

The listening device produced a wealth of intelligence about drug trafficking and people smuggling. Detectives reported that the Suit and two suspected kingpins were secretly recorded discussing how British organised crime was structured and regularly met to “carve up” the criminal landscape in joint ventures just as Italian mafia families had done in the United States.

At the same time, the detectives continued listening intently to the private calls of the man they believed was poised to replace Nahome as the money man for Britain’s most dangerous organised crime network.

The officers at Operation Beregon were stunned when the bugged phone calls between The Suit and one of his lovers began to reveal that this suspected gangland frontman had parlayed his way into London’s most revered financial institution.

According to well-placed official sources from inside the investigation, The Suit was recorded sweet-talking a lover who had close knowledge of the Bank of England and the deliberations of its most secretive committee.

The detectives gleaned from the calls that the woman The Suit was pumping for information was the wife of a Bank insider.

“He was talking to [her] always at the time the monetary policy committee was sitting,” one source said. “They would discuss whether interest rates were going to rise or fall.”

The MPC had only just been set up in 1997 in a landmark move by the new chancellor, Gordon Brown, to make the Bank of England independent of the government in setting interest rates.

It was comprised of eight members including the then governor Eddie George and his future replacement, Sir Mervyn King, along with a selection of the country’s most eminent economists, and its meetings were governed by the strictest code of secrecy.

Interest rates are the government’s key tool in controlling inflation, and at the time of Operation Beregon they were fluctuating as the new committee grappled with the rising cost of living. The base rate had climbed from 6% in early 1997 to 7.5% by mid-1998, and was followed by a dip to 5% a year later.

In a booming stock market, a savvy speculator armed with inside knowledge of what the MPC was about to do could cash in by betting on movements in financial indexes or buying future share options. At the time there was a longer period between decisions about interest rates being made and the public announcement than there is today.

The Suit’s lawyers said he had “never received such information, let alone acted upon it. Further, he has never had a sexual relationship with the wife or partner of any Bank of England insider.”

The apparent compromise of the MPC alarmed detectives because The Suit was suspected of fronting for some of London’s most dangerous criminals, as well as being linked to international mafia groups and terrorist organisations.

The threat to national security was considered so severe that the detectives urgently referred their intelligence to Britain’s spymasters.

Senior intelligence officers from MI5 and other agencies were given a detailed presentation on Operation Beregon in a meeting room at Spring Gardens, the anonymous building in Vauxhall from where the phone taps were controlled.

In a PowerPoint presentation seen by BuzzFeed News, the spies were briefed about the two older men in the trio and their suspected links to other organised crime syndicates in Holland and the UK. The Suit was described as a “money launderer [with] international connections”. All three men were linked during the briefing to “terrorist groups” involved in drug trafficking and a plot to smuggle immigrants.

Sources say the compromise of the MPC was discussed in detail. In a section of the presentation marked “Confidential: extremely sensitive information”, detectives warned that the criminal network had access to “financial inside information” with “political implications” and warned that there was a risk of “destabilisation of [the] UK economy” from “dirty money within the banking structure”.

The spies took control of the tap on The Suit’s mobile phone almost immediately. “MI5 put people in the middle,” said a source. “The spooks would not tell the police what they did with the information.”

However, sources said word got back to detectives that MI5 had quietly approached The Suit. He denies this.

But details of how organised crime was believed to have penetrated the secrets of the Bank of England were kept hidden.

A tape of the discussions between The Suit and the head of the trio about how Britain’s most notorious gangs acted as a criminal cartel was passed by the detectives at Operation Beregon to a senior Met officer. But sources say police chiefs still refused to accept that the country’s organised crime groups were anything but loosely affiliated.

When approached this week by BuzzFeed News, The Suit’s lawyers said that the two older targets of Operation Beregon were “the landlords of a property rented by one of [his] businesses from about 1996 to 2008” but that “he has no other connection with them”. They said he “was not aware of any allegation that either of them was involved in crime” and “has had no contact with them for many years".

Operation Beregon closed down shortly after MI5’s intervention without making any arrests, although Terry Adams pleaded guilty to money laundering and was sentenced to seven years in prison in 2007 after a joint police and MI5 operation.

But now the former detective chief inspector who helped run Operation Beregon is suing Scotland Yard in a case that threatens to blow open the secrets of the Met’s covert operations into organised crime.

The claim brought by former DCI David McKelvey and his former colleague DC Darren Guntrip alleges that the force failed to protect them during a difficult organised crime operation and that evidence of political and police corruption was repeatedly covered up or ignored.

Police lawyers sought to prevent publication of the contents of the legal claim during a private hearing in front of Master Barbara Fontaine at the High Court nine months ago.

She granted the secrecy order at the same time as the Met faced criticism in parliament from MPs over its mistreatment of police whistleblowers.

The Met said it was seeking to protect the officers’ safety and its methodology against organised crime by keeping the legal documents secret. But the claimants suspect the intention was to protect the force from criticism over its alleged failure to tackle “systemic” corruption.

The secrecy order was rescinded on 20 July during a pre-trial hearing, paving the way for the file to be unsealed within days.

After being contacted by BuzzFeed News yesterday, Bank officials began a frantic search of its paper archives, while lawyers were dispatched to the High Court to seek access to references to Beregon in the case file. They are also seeking access to transcripts of The Suit’s bugged phone calls.

After examining personnel records, a spokesperson for the Bank confirmed that no leaker had been identified, disciplined, or sacked.

“The Bank of England was approached regarding a potential issue by the police at the time," he said. "The Bank followed up and nothing was found to substantiate the claims of a leak.

“Any member of the Bank’s staff signs the Bank’s Declaration of Secrecy … There are also strict purdah rules about policymakers speaking on or off the record in the days before a monetary policy decision. MPC decisions have always been tightly held … The Bank has the means to watch out for any surprise or premature market moves before a key policy decision is announced.”

The Met said it was “not prepared to comment on highly selective elements from a complicated and long running case outside of the court process” but that it would “continue to defend the claim”.

The National Crime Agency, whose forerunner the National Crime Squad ran Operation Beregon, declined to comment.