Karunakaran Kandasamy, also known as Karuna and the main US representative of the Liberation Tigers of Tamil Eelam (LTTE), was charged Wednesday in Queens, New York, and was scheduled to be taken before a magistrate, the embassy said.

"The arrest is the latest in ongoing investigation of (the) terrorist group's reliance on individuals in the US as a major source for money, arms, and military technology," the statement said.

If convicted, the man faces a maximum sentence of 15 years imprisonment, the statement added.

It said the LTTE, designated a foreign terrorist organisation by the US State Department since October 1997, has covertly operated within the country "to further its war of terror in Sri Lanka and elsewhere."

"We refuse to allow this to continue," the statement quoted US attorney Roslynn R. Mauskopf as saying.

FBI investigator Mark J Mershon said the suspect "hasn't merely supported the Tamil Tigers' cause, he orchestrated US support."

"We can no sooner allow terrorists to raise funds here than we would allow them to carry out acts of terrorism here," Mershon was quoted as saying.

Meanwhile, Sri Lankan warplanes bombed areas in rebel-held territory in the island's north on Thursday, a day after fierce ground battles between the two sides, the rebels said.

The Liberation Tigers of Tamil Eelam (LTTE) said military jets dropped a dozen bombs over a residential area of the Kilinochchi district, 330km north of the capital, Colombo.

The rebels added that two civilians were wounded in the attacks.

The air raids followed fierce fighting Wednesday in the neighbouring district of Mannar, where both sides claimed they had inflicted heavy casualties.