The man, who claims to work for G4S, the security firm which has been unable to recruit enough staff for the games, said corners had been cut and some team members were not up to the job.
He says he witnessed several instances during training where his colleagues failed to spot weapons or bombs being smuggled past them.
The employee told Sky News he is an expert in weapons and detecting improvised explosive devices (IEDs).
He said: "I can see so many security loopholes for this event. Security staff are given a very short time to achieve their training and there is a very slack approach.
"During my employment I planted pretend IEDs, decommissioned weapons, knives and other large metallic objects on students and sent them through the metal detectors.
"They're not being seen by X-ray staff and they're not being picked up during physical searches, so the training is completely insufficient."
It came after it emerged soldiers facing redundancy from the Argyll and Sutherland Highlanders are among the 3500 extra military personnel being deployed to fill the security gap at the 2012 Olympics
A senior Coalition Government source said the £284 million contract with private security firm G4S did not include a penalty clause for failing to recruit sufficient numbers of security staff. The source added: "The person who negotiated the contract should be shot."
British troops from as far afield as Canada, as well as some coming back from Afghanistan, are also being transferred to provide security cover.
The extra Army contingent will mean a total of 17,000 armed forces personnel will be involved in the Olympics in various roles.
The source said many of the troops, including some from the Argylls – who last week learned they were to be cut from a battalion of 460 men to a company of just 120 engaged in ceremonial duties – would not be happy.
Senior Army officers fear the extra demands being placed on troops, particularly those facing redundancy, will have a damaging effect on morale as leave has been cancelled.
The UK Government source said some soldiers, having just ended tours of duty, will be deployed to check bags and guard perimeter fences at venues, which will result in the cancellation of family holidays. Compensation will be paid.
Jim Murphy, the Shadow Defence Secretary, said: "The Argylls were told to guard Scottish castles, now they will be guarding the Games. This is important for the country but embarrassing for the Government."
Retired Colonel Richard Kemp, a former UK commander in Afghanistan, said the snap Olympic deployment would hit troops very hard.
He said: "We shouldn't forget also that many of these soldiers are people who have been told in the last few days that they are going to be made redundant, that their regiments are being scrapped and they are under great pressure already."
The Ministry of Defence is demanding the bill be picked up by the Home Office.
The Coalition source also expressed astonishment at the contract between G4S and Locog, the games organisers.
It involves a pro-rata arrangement in which the security firm is paid for each security guard it supplies but is not penalised if it fails to reach the agreed target.
This seems to contradict the assertion by Theresa May, the Home Secretary, who said during a Commons statement that she understood there were "penalties within that contract".
She added: "There is no question of Olympic security being compromised."
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