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The number of border area fuel laundering plants and filling stations selling illicit fuel is alarming, a cross-border political body has said.

The British-Irish Parliamentary Assembly (BIPA) was reporting on how law enforcement agencies in both jurisdictions work together.

Smuggling and illicit trade are some of the largest challenges faced, it said.

It said a cross-border approach was needed to tackle problems such as fuel and tobacco fraud.

As BIPA members met in Dublin to debate the report's findings, Fine Gael TD Patrick O'Donovan claimed the authorities were turning a blind eye to illegal activity in the border area, motivated by "appeasement".

He suggested that Sinn Féin was benefiting financially.

Sinn Féin MLA Barry McElduff said his party unequivocally condemned such activities.

He said the head of the police in the Republic of Ireland had written to his party to confirm they held no information to suggest that the IRA had retained its command structure and was involved in smuggling fuel laundering and counterfeiting.

Fianna Fáil Senator Jim Walsh said that if the Garda Commissioner was in "denial", he would be happy to take her on a tour of the border area to show her what the committee had seen.

As part of preparations for the report, politicians from Northern Ireland and the Republic of Ireland visited police stations in counties Armagh and Louth, and were shown a number of fuel laundering operations that had been uncovered.

The report called for law enforcement authorities to make every effort in "their collaborative efforts to shut down these operations, despite the difficulties in policing some of these areas".

"Furthermore, where the operators of filling stations are successfully prosecuted for selling laundered/illegal fuel, provision should be made in legislation to ensure that these outlets cannot simply be reopened again after a few weeks, as happens at present," it said.

The report said it hoped a new marker to be added to fuel later this year would deliver its aim of "seriously curbing the incidence of diesel laundering".

The committee said it noted concerns about budgetary constraints faced by agencies in both jurisdictions.

The Revenue Commissioners in the Republic of Ireland told the committee that its overall expenditure had been reduced by more than a fifth since 2008, and it had 13% fewer staff.

The committee called for gaps in enforcement to be filled by targeted investment and increased funding, such as the UK government's investment in HM Revenue and Customs that led to an increase in tax receipts.