Egypt's government on Sunday denied accusations from human rights groups that it was trying to smother some of the ruling military council's most vocal opponents when it raided the offices of 17 non-governmental organisations last week.
Angered by the swoops, Washington called on Egyptian authorities to halt "harassment" of staff of the groups involved, which included the U.S.-funded National Democratic Institute and International Republican Institute.
The U.S. government also hinted it could review the $1.3 billion in annual military aid to Cairo if the raids continued.
Egyptian government ministers told a news conference the authorities had acted within the law as part of an investigation into illegal funding of political activities.
"These violations are criminal and the punishment could include imprisonment," said Justice Minister Adel Abdelhamid Abdallah.
He said Egypt was keen to support human rights groups, including foreign ones, and that 35,000 organisations were operating under the law and with appropriate permits in Egypt.
"It is not just Egypt that bans political funding or funding that has political aims," said Planning and International Cooperation Minister Faiza Abu el-Naga. "Even the U.S. bans such funding."
She said the number of non-governmental organisations violating the law on funding political activities had grown since an uprising overthrew President Hosni Mubarak last year.
Both ministers stressed the independence of Egypt's justice system, but did not explain what democracy campaigners and many other Egyptians see as the legal system's failure to bring to justice those responsible for the deaths of more than 850 people during the anti-Mubarak revolt.
"The justice system and prosecutor's office are quick and efficient in investigating and charging civil society and rights groups that have critically revealed human rights violations by Egyptian authorities against protesters," said activist Mohamed Fahmy.
"Yet they cannot bring a single official or police officer responsible for the killing of the martyrs of the revolution to justice," he added.
Almost a year since the uprising, no official has been convicted for the killing of protesters. On Dec. 29 an Egyptian court cleared five police officers of criminal charges over the killing of five protesters during the revolt.
Abu el-Naga said the government was "keen in light of the gains of the January 25 revolution to assert human rights and the respect of the Egyptian citizen".
Washington's ambassador to Egypt, Anne Patterson, had promised that U.S. groups whose premises were searched in the investigation would seek to register themselves with the authorities, Abu el-Naga said.
It was not immediately clear which of the groups targeted in the raids had been registered beforehand.
Civil society groups that helped drive the protests that toppled Mubarak in February have become increasingly vocal in criticising what they call the army's heavy-handed tactics in dealing with street unrest in recent months.
In a joint statement last week, 27 civil society groups said the military council ordered the raids to defame and stigmatise activists, rights groups and others at the forefront of the anti-Mubarak revolt.