The UDA was blamed for attacks on immigrants

The IMC welcomed moves within the Ulster Defence Association and the Ulster Volunteer Force to move away from paramilitarism and criminality.

But the IMC said both organisations needed to accelerate those moves.

It also said they were still involved in racist and sectarian attacks and criminality, including drug dealing.

The IMC observed: "On the loyalist side we believe that amongst the leadership are people still working to guide the respective organisations away from criminality and towards both involvement in community development and democratic politics.

"There have been some signs of progress but it has been patchy and there remains a long path still to be trodden. It seems to us that if the initiatives in support of community development are to remain credible, the pace needs to quicken and the results to become more apparent."

The report said UDA members were behind attacks against immigrants in Antrim and had tried to force some foreign nationals from their homes.

The report also said the organisation was responsible for the majority of loyalist shootings and beatings.

"We think that many reflect either internal friction or are directed against those behaving anti-socially and we note that senior UDA members continue to brief members not to undertake such attacks," the IMC said.

Money laundering

The IMC said there were encouraging signs of senior figures trying to steer the UDA towards involvement in community development, democratic politics and the avoidance of sectarian conflict.

It noted: "Members have been threatened with expulsion if they do not desist from crime. We also note that there is now a code of conduct covering members' behaviour."

The commission also noted the UVF had scaled down its violence, with no record of any so-called punishment shootings and assaults and leadership instructions for members not to get involved in crime.

But UVF members intimidated immigrants, issued threats against a hostel housing sex offenders and in south Derry had authorised sectarian attacks against buildings and symbols associated with republicans.

We recognise, therefore, that some in the leadership are trying to guide the UVF towards reducing criminality IMC

There had also been no major change in the involvement of members in criminal activity, although there were indications of a reduction in drug dealing.

Recruitment was continuing as was intelligence gathering, particularly against dissident republicans and other loyalist groups.

The IMC acknowledged: "There is considerable discussion of possible future restructuring, downsizing and reorientation of the organisation.

"We recognise, therefore, that some in the leadership are trying to guide the UVF towards reducing criminality, engaging more positively in the development of their communities and avoiding sectarian conflict.

"But the impact of these efforts remain mixed and limited and the pace of movement is slow."

The commission claimed the Loyalist Volunteer Force, which broke away from the UVF in 1996, remained a paramilitary group but was primarily criminal in nature.