US has identified countries in the Middle East as a major source of funding to extremists organisations in Afghanistan and Pakistan.
To stem the flow of cash to terrorists, the US has set up an inter-agency task force headed by Treasury Department, which is monitoring appeals for funding by these groups all over the globe.
The US has said that most of the terrorist funding is being routed through the 'hawala' network and the fund squeezing is being done quietly.
"Working closely with Ambassador Richard Holbrooke [ Images ], Treasury is deeply involved in the effort to deny financial support to Taliban, Al Qaida, the Haqqani network, LeT and other terrorist groups active in that region," Assistant Secretary for Terrorist Financing David Cohen said.
Since being appointed as the Special Envoy to AfPak, Holbrooke has made several trips to Middle East in this connection, Cohen said at a Money Laundering Enforcement Conference on Tuesday.
"The Treasury Department leads an inter-agency task force whose mission is to coordinate and enhance our actions to disrupt terrorists' and insurgents' financial support networks while, spurring the development of a well regulated financial sector in Afghanistan and Pakistan," Cohen said.
He said the US was improving engagement with its Persian Gulf allies to stem the flow of donations to Taliban and other terror groups and working with Afghan and Pakistani governments to facilitate mobile banking in both countries.
The administration was focused on developing policy to combat illicit finance at home and abroad, from mortgage fraud to money laundering, to those funding terrorists, he said.
The Treasury is taking a comprehensive approach to countering illicit financial activity that fuels drug trade and more generally, supports the international criminal networks that are behind much of the violence, he said.
Cohen said well designed and well-implemented compliance programmes would contribute meaningfully in the drive to disrupt the funding channels of terrorist groups.
The official also asked the private sector to cooperate in combating the financing of terrorism around the world.
He said Al Qaeda's current financial predicament was a result of the success of these coordinated strategies.
"In the first six months of this year Al Qaeda's leaders made four public appeals for money... We assess that Al Qaeda is in its weakest financial condition in several years, and that, as a result, its influence is waning," he said.