Megvii cleared of supplying biometrics for Chinese surveillance app but may still delay IPO

Biometric facial recognition technology from Megvii’s Face++ was not in fact used in the Integrated Joint Operations Platform (IJOP) used by Chinese authorities form surveillance data aggregation as part of a system of repression in Xinjiang Province, according to a correction added at the end of a report by Human Rights Watch (HRW). The company is still rethinking its plans to launch an initial public offering this year however, the Financial Times reports, amid trade tensions and the threat of sanctions.

An HRW report on the IJOP published in May accused Megvii of supporting the surveillance system with facial recognition capabilities, based on the inclusion of Face++ code in the in the log-in function. Megvii denied any relationship with IJOP at the time, and subsequently contacted HRW again to not that the Face++ account referred to in the code had never actively been used. HRW says it has independently confirmed that the code was inoperable.

“As Face++ seems not to have collaborated in the version of the IJOP app Human Rights Watch examined, we have decided not to highlight its name in our recommendation section, although we believe our recommendations are pertinent to any company providing public security technology operating in Xinjiang,” HRW wrote in the correction.

The correction could reduce the motivation of U.S. authorities to impose sanctions on the company, as it has reportedly considered doing for Megvii, Hikvision, and several other companies that appear to have ties to the Chinese government and state repression programs.

Before that threat, Megvii had been reported to be considering an IPO on the New York Stock Exchange, or more likely on the Hong Kong exchange, later this year.

Those plans now appear to be on hold. A tech sector banker told FT that underwriters are continuing to work on the IPO, but concerns around its customer base and the end uses of its products, and the threat of being labeled an ‘unreliable entity,’ make the timing questionable. Chinese tech companies listing within the past year, including Xiaomi, have also performed poorly, which has affected Megvii’s thinking, according to the report.

Megvii has said its products “are not designed or customized to target or label ethnic groups” and that its clients are obligated to avoid human rights infringements, according to the South China Morning Post. The Post also reports that when asked about surveillance in Xinjiang in an interview last month, Megvii CEO and Co-founder Yin Qi said “technology is definitely not to blame, definitely someone should be responsible.”

SenseTime is thought to be considering an IPO next year or in 2021, investors and bankers told FT, with one noting that the company is profitable and in no hurry to go public. Megvii is reported to have higher revenues than SenseTime.

Updated 2019-06-06 1:50 PM

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