Common type of preservative found in cosmetics. Despite some claims, there is no higher level of skin reaction to formaldehyde-releasing preservatives than to other preservatives. In fact, there is a far greater risk to skin from a product without preservatives, because of the contamination and unchecked growth of mold that can result if no preservatives are used.
However, there is concern that when formaldehyde-releasing preservatives are present in a formulation that also includes amines, such as triethanolamine (TEA), diethanolamine (DEA), or monoethanolamine (MEA), nitrosamines can be formed. Nitrosamines are harmful substances that can potentially penetrate skin. Whether or not that poses a health risk of any kind has not been established.
References for this information:
British Journal of Dermatology, March 1998, pages 467–476
Fundamentals and Applied Toxicology, August 1993, pages 213–221