It follows the discovery of £3,500 by officers investigating suspicious activity in Londonderry last September.
The police believe that the money was in the hands of the 'New IRA'.
This is the first time that police in Northern Ireland have used powers under the Crime and Security Act 2001 to seize cash in these circumstances.
Supt Mark McEwan said: "We know that these people are involved in criminality that creates harm and suffering in our community.
"It means that money that may have been used to buy guns and explosives to attack members of the community, including police officers, has been taken out of circulation."
Antrim Crown Court was told on Tuesday that a claim by an individual to contest the forfeiture had been dropped.
Money seized under the legislation is retained by the Treasury, with a portion being allocated to the PSNI.
Supt McEwan said that the police can use this money for specific operations to combat crime.
The PSNI has used new powers for the first time to seize money that was believed to be in the hands of dissident republican paramilitaries.