Wallace joined the civil service on 15 March 1968 as an assistant information officer for the Ministry of Defence at the British Army Northern Ireland headquarters at Thiepval Barracks in Lisburn. He became an established information officer from 14 December 1971 and a senior information officer with effect from 27 September 1974, having first held this latter post on temporary promotion.
As well as carrying out overt information work for the Army, Wallace was also working for the Intelligence Services as a member of the ultra-secret Army Psychological Operations unit, covertly attempting to undermine the Provisional Irish Republican Army (IRA) and loyalist paramilitary groups. One of Wallace's roles was to plant a number of bogus news stories such as one titled "Danger in those Frilly Panties" in the Sunday Mirror, which suggested that female IRA volunteers were causing premature explosions due to static electricity caused by their underwear, in order to divert the IRA's bombmakers from the real cause of the bombs' failure.
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