An Islamic State suicide bomber from Britain who blew himself up in an attack on Iraqi forces this week had been given compensation for his detention in the Guantanamo Bay military prison, Western security sources said on Wednesday.

Islamic State militants said Abu-Zakariya al-Britani, a British citizen who was originally known as Ronald Fiddler and then cast himself as Jamal Udeen al-Harith, detonated a car bomb at an Iraqi army base southwest of Mosul this week.

The militants also published a photograph of the smiling bomber surrounded by wires in the seat of what appeared to be the car in which he blew himself up.

The Islamic State statements could not be independently verified by Reuters but three Western security sources said it was highly likely that Britani was the bomber and now dead.

Originally from the northern English city of Manchester, he converted to Islam in his 20s. He was detained in Afghanistan by U.S. special forces and taken to Guantanamo in 2002.

Britani was freed in 2004 after the government of then-Prime Minister Tony Blair lobbied for his release and later travelled to Syria to fight with Islamic State.

A spokesman for Prime Minister Theresa May said on Wednesday the government was not able to verify his identity. "There is no independent confirmation of the identity of this man who is believed to be dead in Mosul," he told reporters.

Asked whether he believed Britani had moved on from Syria he said: "I am not going to comment on intelligence matters". He also said the conflict in Syria meant it was impossible to verify events there.

Britain reached a civil damages settlement with British former Guantanamo Bay inmates in 2010, then-Justice Secretary Kenneth Clarke told parliament at the time, but he did not disclose the size of the payouts, citing confidentiality agreements.

The Daily Mail reported that Britani had been awarded $1.25 million by the British government after claiming British agents knew or were complicit in his alleged mistreatment. May's spokesman declined to comment on the details of any payments or whether the government had been monitoring Britani.

Britani's family, in a statement to the BBC, said their son had not received a million pounds in compensation and that they believed that figure was a group settlement, including costs, covering other inmates too.

In a statement posted by his office on Twitter, Blair said the Mail newspaper had led a campaign pushing for Guantanamo detainees' release, and it had been supported by lawmakers from May's Conservatives.

"The fact is that this was always a very difficult situation where any government would have to balance proper concern for civil liberties with desire to protect our security, and we were likely to be attacked whatever course we took," he said.