The report said the LTTE also used Tamil charitable organizations as fronts for its fundraising.

"In November, the US Government designated under Executive Order 13224 and froze the US-held assets of the Tamil Rehabilitation Organization, a charity associated with the LTTE. The LTTE previously used such funds for weapons purchases on the international black market and also captured arms from Sri Lankan security forces. The Sri Lankan Navy sunk three LTTE supply ships in September and another in October," the report said.

After a period of targeting Sri Lankan military and official personnel throughout 2007, the LTTE appears to have recently resumed its targeting of civilians, the Report added.

It said the Government took effective control of the Eastern Province in midyear, but the LTTE continued to control much of the north and carried out attacks throughout the country.

"The LTTE and the Karuna faction were charged with forced conscription and child recruitment. In general, the LTTE did not intentionally target U.S. citizens or assets, limiting attacks to Sri Lankan security forces, political figures, civilians, and businesses.

However, attacks occurred within the vicinity of the U.S. embassy and personnel; the U.S. Ambassador was travelling in a helicopter that came under mortar fire in February. The LTTE subsequently apologized for the incident," the report added.

It recalled that Sri Lankan cooperation with the FBI resulted in arrests of persons charged with material support to terrorist groups.

The U.S. provided training for relevant Sri Lankan government agencies and the banking sector. The Government of Sri Lanka cooperated with the United States to implement both the Container Security Initiative and the Megaports programme at the port of Colombo.