WASHINGTON -- U.S. efforts over the past year to financially paralyze terrorists are producing some "real-world effects," including squeezing the al-Qaida network, the Treasury Department said Tuesday.

Plans to cut off financing of terrorist groups, begun by President Bush following last year's attacks on the World Trade Center and the Pentagon, are making substantial progress, but more needs to be done, the department said in a report.

"Our goal is to bankrupt their institutions and beggar their bombers," the report said. "We are off to a good start but it is a long obstacle-filled road ahead. We will not relent."

While the report didn't spell out what those obstacles are, Treasury officials have said one of the challenges is trying to track money flowing through nontraditional financial channels, such as trading in diamonds or gold. The U.S. is working with other countries to improve such tracking.

The report said that U.S.-led actions to freeze assets belonging to terrorists are having a "deterrent effect, leading those who would assist the financing of terrorism to avoid use of the traditional financial system."

Approximately $112 million in assets belonging to suspected terrorists have been frozen worldwide in more than 500 accounts since Sept. 11 last year, the report said. Of that total, $34 million has been blocked in the United States and $78 million overseas.

Suffering financially

"Our efforts are having real-world effects," the Treasury report said. "Al-Qaida and other terrorist organizations are suffering financially as a result of our actions. Potential donors are being more cautious about giving money to organizations where they fear that the money might wind up in the hands of terrorists. In addition, greater regulatory scrutiny in financial systems around the world is further marginalizing those who would support terrorist groups and activities."

But a United Nations report last month said the global campaign to choke off financing for terrorist organizations had stalled, with only $10 million frozen in the past eight months.