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e.l.f. Gets a Lash-ing for Sourcing from North Korea

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To settle a potential civil liability for violating North Korea Sanctions Regulations—156 of them, to be exact—e.l.f. Beauty  has agreed to pay $996,080.

CNBC reports that, according to the U.S. Office of Foreign Assets Control, the company imported 156 shipments of false eyelash kits (a value of $4.43 million) from two Chinese suppliers—with materials sourced from North Korea. The kits were imported approximately between April 1, 2012 and Jan. 28, 2017.

The company said it realized the issue after a self-audit of third-party suppliers.

“During a routine, self-administered audit in early 2017, we discovered two third-party suppliers utilized some materials from the Democratic People’s Republic of Korea to produce certain false eyelash kits,” e.l.f. Beauty chairman and CEO Tarang Amin told the outlet. “Amin noted his company was not aware of the origin of the materials. “These false eyelash kits represented less than 1% of e.l.f.’s revenue at the time.”

Related: Stockholder Urges e.l.f to “Reinvigorate Good Corporate Governance”

The Office of Foreign Assets Control, part of the Treasury Department, said in a statement that it agreed that the company did not appear to know the material was from North Korea. It also noted that the violations did not make up a “significant” portion of the company’s business, and that it immediately disclosed the violation.

“We take great pride in doing the right thing and having strong compliance and quality assurance programs,” Amin said. “In our 15-year history, we have delivered the best combination of quality, cost and speed in our industry. We are continually enhancing our quality assurance program and are committed to ensuring that all of our products are produced legally and responsibly.”

Calling it a “cautionary tale” for other retailers, attorney Seth Berenzweig, managing partner of Berenzweig Leonard LLP, stated: “The only reason the Treasury Department went easy on [e.l.f. Beauty] was because it self-reported and agreed to put in a lot of controls in place to avoid this in the future.”