The suspected mob boss was spotted visiting family in Dublin's south inner city after he arrived back from Spain last week.
Specialist garda units such as the Organised Crime Unit as well as local detectives are now monitoring Thompson's every move.
'Fat' Freddie (31) arrived back last Tuesday after 14 months in Spain, leading to an increase in gangland tensions in the capital.
It is believed he is not just home to visit family and friends, but is on a debt-collection drive for jailed crime godfather Christy Kinahan (55), who is the brains behind a multi-million-euro drugs and crime cartel.
Thompson is expected to demand tens of thousands of euro from drug dealers during his Christmas visit.
Gardai believe Kinahan is owed more than €3m in unpaid drug debts.
A source explained: "The cartel are actively seeking to get money owed and they have enlisted Freddie and two of the capital's most feared criminals to do this for them."
Dealers across the capital are on high alert over the return of Thompson.
Gardai have already received intelligence that Thompson visited three small-scale drug dealers in the south inner city last week demanding unpaid money.
A middle-aged group of criminals working with Freddie is from the Tallaght area.