WASHINGTON, April 18 (Reuters) - U.S. guns, many of them exported legally, are flowing into Latin America in an "iron river" ending in the hands of drug cartels and abusive security forces, activists said Monday, calling for greater oversight from U.S. law and federal agencies.

More than half of "crime guns" recovered and traced in Central America are sourced from the United States, according to U.S. gun control agency ATF. This level nears 70% for Mexico and is around 80% across the Caribbean.

"It's called the iron river and it's flooding countries to the south," Elizabeth Burke of U.S. non-profit Global Action on Gun Violence said at an event organized by the Center for American Progress in Washington.

Burke called for rules preventing manufacturers from selling to dealers with lax distribution practices. Manufacturers should also stop selling armor-piercing weapons and guns that can easily be modified to shoot hundreds of bullets at a time, she said.

John Lindsay-Poland, an activist from Stop US Arms to Mexico, added that lax license rules and enforcement helped facilitate the cross-border flow of arms - including military-grade weapons desired by cartels.

"Why would we be arming the very people that we say we are fighting?" he said, calling for more controls at the start of the supply chains.

Sixteen U.S. states and a handful of Caribbean governments last month expressed support for Mexico's appeal in a civil lawsuit against U.S. gun manufacturers, which seeks to hold them responsible for facilitating the trafficking of deadly weapons.

U.S. gunmakers have maintained that they sell firearms legally to Americans who pass a background check, and their lawyers have argued that holding them responsible opens the door for other lawsuits, such as the deaths of Russians killed by their weapons in Ukraine.

U.S government figures show last year that income from legal firearm shipments to Latin America increased 8%, with most sales going to Brazil, Mexico, Guatemala and Colombia.

The National Rifle Association and the State Department did not immediately respond to a Reuters request for comment.

"We don't want more tragedies in our families," said Maria Herrera, who founded a national collective investigating the many forced disappearances in Mexico and where the number of gun homicides is surging.

"It destroys lives, breaks families apart, fills communities with pain and panic," Herrera said at the event. "We can't live like this."