Extremist reporting in the UK prison system and the top security service, MI5, failed to assess the threat from Libyan asylum seeker Khairi Saadallah in the months before the terror incident that killed three people on Saturday.
A judge who handed Saadallah a jail sentence that ended this month warned that efforts to rehabilitate him had gone wrong.
In a court appeal in March, Mr Justice Goss said the judge who sentenced Saadallah had “observed that numerous outside agencies had attempted to help him”.
The Libyan, who is the suspect in the Reading park terror attack, was known to the UK security services.
It was Europe’s first terror attack since countries went into lockdown this year because of the coronavirus pandemic.
Saadallah, 25, was released only 17 days before the attack after a sentence for possessing a bladed article and assault.
On Saturday, three people were killed and more wounded when a man armed with a knife went on a rampage, stabbing people as they enjoyed picnics in the sun at Forbury Gardens.
The assailant then dropped the weapon and fled. Saadallah has been arrested on suspicion of murder.
Sources say he was known to Britain's MI5 internal security services, again raising questions about its monitoring of suspects.
"What you appear to have here is a lone actor and they are obviously particularly hard to detect," said Jonathan Hall, the Independent Reviewer of Terrorism Legislation.
Saadallah arrived in the UK from Libya in 2012 and moved first to the northern England city of Manchester.
A neighbour said one of his family members fought against the Libyan deposed leader, Muammar Qaddafi.
Manchester is home to a large Libyan community and is where the terrorist Salman Abedi, whose family also fought against Qaddafi, plotted and carried out the bombing of the city’s arena, killing 22 people at an Ariana Grande concert in 2017.
Another Libyan, Abdal Raouf Abdallah, is serving a long sentence for co-ordinating from his bedroom in Manchester the movement of ISIS fighters and weapons across Europe and from Libya to Syria.
Abdallah's family settled in Britain after his father, a political opponent of Qaddafi, fled Libya.
Two years ago, Saadallah applied for refugee status in the UK on religious grounds.
He was granted asylum for five years under human rights rules, despite his convictions for violence, because it was too dangerous for him to return home.
But western security sources say Saadallah had been on the radar of MI5 since last year and there was intelligence that he had aspirations to travel for extremist purposes.
He was jailed last October for offences from November 2018, including racially aggravated common assault after he called a police officer a “slave” and spat in her face, carrying a bladed article and assaulting an emergency worker.
Last January Saadallah struck a security guard in the face with his belt when he stopped him from shoplifting.
He showed contempt for the UK legal system when he spat at a judge in court after she sentenced him.
Court documents show he has a history of debt and homelessness, and previously suffered from post-traumatic stress disorder, depression and a personality problem.
Nikita Malik, director of the Centre on Radicalisation and Terrorism at the Henry Jackson Society, said agencies needed more resources.
“The UK is monitoring up to 20,000 people as suspects of interest and from his background he probably was not deemed as a high threat,” Ms Malik said.
“This was not sophisticated and random attacks are hard to stop. If he was a security risk questions we need to ask why he was not deported.
“The issue of resources is important, too. The coronavirus is diverting resources, such as officers dealing with lockdown breaches.
“The coronavirus will also have had an impact as the government’s prevention strategy relies on the public reporting suspicious behaviour but during lockdown this would not have been happening.
"This shows how terrorists will use the pandemic to adapt. Instead of targeting concert halls and shopping centres they now have to look at open public spaces where people might be.”
The UK security services have come under mounting scrutiny over the past three years after terror attacks where the offenders had been known to them, including Abedi.
The most recent was in February when Sudesh Amman stabbed two people in south London.
Amman had been under counter-terrorism surveillance at the time after his release from prison for terror offences.
In the case of Abedi, Parliament's intelligence and security committee ruled there were "failings" and said MI5 had acted "too slowly".
MI5 has admitted it had a policy of allowing Libyans in the UK to travel to fight against Qaddafi and return later, including some who had been under house arrest in the UK as part of counter-terrorist measures.
In February, the UK introduced emergency legislation to end the automatic early release of terror offenders after Amman’s attack.
In November, two people were killed near London Bridge by Usman Khan, who had also been released early from his sentence for plotting to blow up the London Stock Exchange.
On Monday, Home Secretary Priti Patel called Saturday's attack a "tragic, tragic event” and promised action.
"We need to make sure that we learn the lessons from what has happened over the weekend to prevent anything like this from happening again," Ms Patel said.
"It is clear the threat by lone actors is growing. These terrorists are united by the same vile hate for what our country holds dear – decency, tolerance and respect."
She said the UK thwarted 25 terrorist attacks since 2017.
The latest killings follow warnings from experts that an attack was highly likely.
“While those monitored by the authorities are less likely to present a threat during this period, the police must remain vigilant to those who are off the radar or may be using distractions to smuggle into Europe,” Ms Malik said.
“It is therefore imperative that intelligence is shared between countries to ensure that current gaps are not exploited by terrorists.”
One of the most wanted ISIS terrorists, Abdel Majed Abdel Bary, was found hiding in Spain using coronavirus face masks as a disguise.
Director of the Counter Extremism Project think tank, Hans-Jakob Schindler, said there was still a significant terror threat in Europe.
“Only a few weeks into the pandemic, ISIS began calling again on its members to conduct attacks again," Mr Schindler said.
"In April, a first ISIS cell was arrested in Germany that had continued to plan attacks on US installations.
“Therefore, currently, the pandemic does not result in a reduced terrorism threat.
“It remains to be seen how much the increased screen time that Europeans have experienced during the lockdowns have influenced online radicalisation numbers.
"But my guess is that we will see a spike of radicalised individuals in the near future.”