U.K.-based human rights group RAID accused The London Bullion Market Association of walking back on a pledge that it would suspend certifications for gold refineries suspected of violating its ethical sourcing standards, citing the gold trade group's report on responsible metals supplies stating that it would only do so "as a last resort."

The association, or LBMA, is the world's largest gold exchange and has been seen by the corporate world as administering the best standard available to define gold and silver as acceptable for banks and manufacturers. In order to be certified as a "good delivery" precious metal refiner by the LBMA, a company must follow the association's responsible sourcing guidelines.

According to the LBMA's responsible gold guidance, if the result of gold supply due diligence conducted by the association indicates any violations or a high possibility thereof, the refinery should stop processing gold from the origin until it can obtain additional information to confirm or refute the preliminary assessment. The list of violations includes money laundering, terrorist financing, serious human rights abuses, direct or indirect support to illegitimate nonstate armed groups and a fraudulent misrepresentation of the origin of minerals.

However, in its first report on the responsible sourcing program, the gold association said, "LBMA's starting point for [Good Delivery List] refiners is that disengagement from suppliers should only be considered as a last resort, and only where the adverse impact is irremediable and there is no prospect of change."

An LBMA spokesperson denied the association had made any changes to its policies, saying in a Sept. 24 email that refineries will face "immediate" loss of its certification "in the case of a zero tolerance non-conformance" with its responsible sourcing policies.

RAID most recently engaged with the gold association over allegations that India-based refiner MMTC-PAMP India Pvt. Ltd. had refused to allow a third-party auditor to meet with people who reported mistreatment at Barrick Gold Corp.'s North Mara mine in Tanzania. The advocacy group claims the LBMA opened a formal probe into whether the refiner ran afoul of the responsible sourcing guidance, while the gold group has declined to comment on the matter.

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RAID is not the only human rights advocacy group raising concerns about the LBMA's due diligence. Reports released by SWISSAID and Global Witness over the summer accused Valcambi SA of acquiring gold from entities in the United Arab Emirates, which they stated heightened the risk such material was conflicted. The LBMA is also reviewing the certification of the Perth Mint following reports it sourced gold from a Papua New Guinea company owned by a murderer.

The LBMA addressed the MMTC-PAMP and Valcambi allegations in the responsible sourcing report but did not disclose whether any measures were taken against either refiner. The association confirmed the investigation of MMTC-PAMP and said there was "positive co-operation from the refiner throughout." Investigators "noted this was a high-risk mine and all parties involved were working towards improving the conditions, notwithstanding the challenges," the report stated.

The association also released data at the same time as its report demonstrating that less than half of the 4,836 tonnes of gold processed by major refiners in 2018 came from large industrial mines, Reuters reported Sept. 22. Roughly 2,683 tonnes were recycled gold from material such as jewelry, bars and coins returned to the market after being processed outside of the LBMA system.