The UDA failed to meet Margaret Ritchie's 60-day ultimatum
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The Northern Ireland Executive has been threatened with legal action over the withdrawal of £1.2m from a UDA-linked conflict transformation scheme.
Social Development Minister Margaret Ritchie halted the funding last month.
The UDA failed to meet her ultimatum in the summer for it to give up its guns after a number of violent incidents.
Farset, the independent organisation appointed to oversee the project by Ms Ritchie's direct rule predecessor, has informed her it may take legal action.
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