By: Danielle Hatch
e.l.f Cosmetics, Inc. (ELF) of Oakland, California has reached a settlement with the Office of Foreign Assets Control (OFAC) for $996,080 related to 156 violations of the North Korea Sanctions Regulations. The company imported false eyelash kits from two different suppliers in People’s Republic of China that contained materials sourced by these suppliers from the Democratic People’s Republic of Korea between 2012 and 2017.
The settlement agreement described ELF’s OFAC compliance program as nearly non-existent or in adequate during the time of the violations and “The company’s production review efforts focused on the quality assurance issues pertaining to the production process, raw materials, and end products of the goods it purchased and/imported” as opposed to where the materials were coming from.
ELF voluntarily self-disclosed the violations and OFAC found that the violations themselves were non-egregious.
OFAC found the following to be aggravating factors:
- The apparent violations may have resulted in U.S.-origin funds coming under the control of the DPRK government, in direct conflict with the program objectives of the NKSR;
- ELF is a large and commercially sophisticated company that engages in a substantial volume of international trade; and
- ELF’s OFAC compliance program was either non-existent or inadequate throughout the time period in which the apparent violations occurred and appears not to have exercised sufficient supply chain due diligence while sourcing products from a region that poses a high risk to the effectiveness of the NKSR.
OFAC found the following to be mitigating factors:
- ELF’s personnel do not appear to have had actual knowledge of the conduct that led to the apparent violations in this investigation;
- ELF has not received a Penalty Notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the apparent violations;
- The apparent violations do not appear to constitute a significant part of ELF’s business activities; and
- ELF cooperated with OFAC by immediately disclosing the apparent violations, signing a tolling agreement, and submitting a complete and satisfactory response to OFAC’s request for additional information.