New York-based rights group Human Rights Watch has flayed the move.
It said the decision to label the LTTE and 15 overseas Tamil groups as financiers of terrorism is so broad that it appears aimed at restricting peaceful activism by the country's Tamil minority.
“The Sri Lankan government is using vague counter terrorism regulations to tie the major diaspora Tamil groups to the ruthless but defunct LTTE,” Asia director at Human Rights Watch Brad Adams said.
“This broad-brush sanction could then be used to punish local Tamil activists and politicians with international ties.”