LONDON, May 8 (Reuters) - Belgium-based merchant Traxys decided to suspend the sourcing of minerals from eastern Democratic Republic of Congo to protect its reputation from any appearance of wrongdoing, it said on Friday.

Earlier this week, Traxys said it would pull out of the east of the country in response to pressure from the United Nations which is aiming to break the link between the minerals trade and violence. [ID:nL4246479]

The minerals merchant said in a statement on Friday that despite putting in place measures to help the U.N., it was still unable to allay concerns to its satisfaction.

"Traxys is mindful of the negative impact that its withdrawal from this market will have on the social and economic well-being of the civilian population," the company statement said.

"However, in an industry that relies heavily on trust and integrity, it is important that Traxys preserve its reputation against even the false appearance of wrongdoing."

The U.N. had requested information proving that dealings between Traxys and intermediaries in eastern Congo had not benefited certain rebel groups.

The minerals trade has long been a key source of revenue for illegal armed groups in the east, including the Rwandan Hutu Democratic Forces for the Liberation of Rwanda (FDLR), composed in part of fighters responsible for Rwanda's 1994 genocide.

Measures put in place by Traxys included deployment of an ex-U.N. official to conduct a due diligence scheme, a self-imposed prohibition in dealing with certain intermediaries and the adoption of trade group and Congolese government initiatives.

"Traxys requested specific solutions, remedies, and/or preventative steps that would allow it to continue its legitimate and law abiding commercial transactions in the Congo without the implication of wrongdoing," the company said.

"No recommended course of action was forthcoming."

A report published late last year by a U.N. panel charged with investigating violations of a Security Council-imposed arms embargo found that Traxys was part of a mineral supply chain that led back to the Rwandan rebels.

Traxys, which lists among its shareholders several private equity firms and steelmaker ArcelorMittal <ISPA.AS>, rejected the U.N. findings and said on Monday this week that it had set up its own framework to verify that the minerals it purchased did not support illegal armed groups.

The U.N. report said Traxys purchased in 2007 1,631 tonnes of the tin ore cassiterite and 226 tonnes of coltan, both used to manufacture electronics devices, such as mobile phones and video games consoles, from four Congolese companies which systematically buy from FDLR-controlled mines. [ID:nL4246479] (Reporting by Michael Taylor; editing by Anthony Barker)

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