Kenyan police arrest American heading for Somalia

* Man was trying to enter area controlled by insurgents

* Arrested U.S. national told police he is a Muslim

* Coast police arrest seven Somalis

(Adds arrest of Somalis)

NAIROBI, Oct 12 (Reuters) - An American man has been arrested in northern Kenya while trying to enter an area of Somalia controlled by Islamist insurgents, police and residents said on Monday.

Lawless Somalia is viewed by the international community as a breeding ground for al Qaeda-linked groups which have been carrying out an insurgency against the U.N.-backed administration of President Sheikh Shariff Ahmed.

A witness told Reuters that the man was arrested on Sunday by police manning the immigration office at the border town of Liboi in Kenya's North Eastern province. He was on his way to Qoqani in southern Somalia without any security escort.

"We have arrested the suspect at the border town," said one police officer, who did not want to be named. "The suspect is being transported to the provincial police headquarters for questioning."

Police thought the man's willingness to enter the conflict-torn nation where foreigners are routinely kidnapped for huge ransoms was puzzling, the witness added. The area he wanted to go to is controlled by the al Shabaab rebel group which the United States says is al Qaeda's proxy in Somalia.

The U.S. national had said he was a Muslim and denied any connection to Islamic radicals who make up the bulk of the insurgency in Somalia, the witness said.

Western nations are increasingly concerned about the radicalisation of Somali youth living in their countries. Some have returned to Somalia to boost the insurgents' ranks.

Also on Sunday, police at the Kenyan coast arrested seven Somalis on suspicion of involvement in unlawful activities in Somalia, before releasing some of them.

"We are investigating their possible connection to militia groups in Somalia," said a police officer who was involved in the arrests at the resort town of Malindi.

"We are vigilant because the situation in Somalia is not very good and our borders, which are highly porous could be an added advantage to the militia groups."

The Department of Defence said Kenyan security forces were on high alert, especially along its border with Somalia, to prevent a spillover of the fighting. (Reporting by Humphrey Malalo, Sahra Abdi in Nairobi and Celestyne Achieng in Mombasa; Editing by Louise Ireland)