New powers to curb fundraising for terrorist organisations will be used to combat the traffic in donations valued as high as £100 million, it was claimed on Tuesday.

The Terrorism Act, which came into force on Monday, is aimed at tackling the growing number of terrorist groups using the UK for non-violent activities including recruitment and fundraising.

Dr Andrew Silk of the Scarman Centre at Leicester University believes the act, though not perfect, is a fair response to a politically-sensitive problem. "The government is trying to be proactive which is good. It was needed and is a fairly well thought-out response. It is mainly aimed at tackling the support elements in the UK for groups based elsewhere," he said.

Silk explained how terrorist activity in the UK has increased. "There is no evidence that attacks are being launched from the UK but there is a big problem with money laundering, recruitment and fundraising," he said. "No-one can put an exact figure on funding but adding up all the groups together then a conservative figure of £100 million would not be unreasonable.

"The previous legislation over the years has been dominated by Ireland. With the current peace negotiations it's not going to be as big a problem although there is still significant activity. The growing problem is with organisations from Asia and the Middle East such as the PKK and the Tamil Tigers," he said.

Most contention has surrounded the new definition a terrorist. Silk said: "The groups the government is focusing on are not hostile to the UK. The problem is that one person's terrorist is another person's freedom fighter. The Sri Lankan government will not see things the same way as a Tamil separatist nor the Turkish government with Kurdish separatists. It's very difficult to call.

"The UN is currently trying come up with a definition of what a terrorist is and is finding it a grey area. They are working on the lines that an act of war is one thing but an attack on a shopping street is a war crime. The trouble is that guerrilla commanders don't see it in those terms," Silk said.

Civil rights group Liberty say the new definition will have far-reaching effects. "It is a quite extreme piece of legislation and creates a far wider definition of who a terrorist is. The GM protestors, Trident ploughshares or anti-road protestors could all be branded as terrorists under the new act. They are all people that potentially fit the definition because they commit acts with political motivations," a spokesman said.

Liberty also claimed the act gave sweeping powers to the police. "You can be held in detention for seven days and the police don't have to tell anyone where you are being kept. It creates a two-tier system where committing a criminal act with political or moral act with a lesser degree of viciousness will receive the same penalties as more violent act by hardened criminals. We also question why the act was necessary when much of it was already covered by the Police and Criminal Evidence Act."