Following a report from BuzzFeed News, Sen. Marco Rubio and Rep. Tom Suozzi want to scrutinize the ties between US institutional investors and two successful Chinese facial recognition companies, SenseTime and Megvii.
US lawmakers are urging institutions to reevaluate their financial relationships with facial recognition companies operating in Xinjiang, China, in light of a BuzzFeed News investigation that found US public pension funds, universities, and foundations are funding two startups developing technology used in the surveillance of Chinese citizens.
Last month, BuzzFeed News reported that organizations like the Rockefeller Foundation, Princeton University, and the California Public Employees’ Retirement System, the largest public employee retirement fund, have helped fund SenseTime and Megvii, two leading Chinese facial recognition companies whose technology is used by the Chinese government to surveil its citizens.
Of major concern for human rights activists and lawmakers is the deployment of those facial recognition tools in Xinjiang, a heavily surveilled region in northwest China that is home to more than 11 million Uighur Muslims. Since 2017, Chinese authorities have detained more than a million Uighur Muslims and other ethnic minorities in internment camps. Detainees who’ve escaped have reported being subjected to torture, abuse, and political indoctrination.
“We must stop this, period.”
“China uses its growing and unfettered access to America’s over $30 trillion capital markets to help finance its military threats, espionage, and egregious human rights abuses,” Florida Sen. Marco Rubio, a longtime critic of Chinese policies, told BuzzFeed News in a statement. “We must stop this, period.”
As BuzzFeed News first reported, large US institutional investors entrusted their money to venture capital or private equity firms that in turn invested in SenseTime or Megvii. For example, the Florida State Board of Administration, which oversees the assets of the Florida Retirement System, is one of many “limited partners” in private equity giant Silver Lake Partners, an investor in a $600 million round of funding in SenseTime in April 2018. Rubio did not directly comment on this investment relationship.
Using venture capital intelligence services and public disclosures, BuzzFeed News identified six prominent universities and 19 public pension plans or retirement systems that have an indirect interest in at least one of the two companies. There are likely more, since not all limited partners in venture or private equity firms are required to publicly disclose their investments.
“I’m deeply disturbed by the Chinese government’s human rights abuses in Xinjiang, which have been marked by extensive surveillance and internment of Uighur Muslims,” said Oregon Sen. Jeff Merkley, whose state treasury is an indirect investor in Megvii through Silicon Valley venture firm GGV Capital. “I would encourage any American-run fund to examine their investments and seriously consider divesting from companies whose technologies are being used to commit these abuses.”
“I would encourage any American-run fund to examine their investments and seriously consider divesting … ”
Merkley is backing the Senate’s Uyghur Human Rights Policy Act, a bipartisan bill co-led by Rubio, which advocates for sanctions against individuals and companies found to be involved in the violation of human rights in Xinjiang. Of the 17 senators supporting the bill, five — Oregon’s Merkley and Ron Wyden, Rubio, John Cornyn of Texas, and Kirsten Gillibrand of New York — are from states where public employee pension plans are indirect investors in SenseTime or Megvii.
Wyden and Cornyn declined to comment on those financial ties, while a spokesperson for Gillibrand did not respond to a request for comment. The bill’s main Democratic cosponsor, New Jersey Sen. Bob Menendez, also did not respond to a request for comment after BuzzFeed News found that Infinova, a Monmouth Junction, New Jersey–based manufacturer of surveillance cameras, had been supplying security systems with SenseTime software to Xinjiang authorities.
A SenseTime spokesperson said the company “was not aware of any application” of its technologies in Xinjiang and said it had “no business” in the region. SenseTime had previously invested in companies in Xinjiang and once held a significant stake in a firm that had collected personal identification data on 2.5 million people, nearly one-third of whom were Uighurs, according to a leaked database.
A spokesperson for Megvii declined to discuss the company’s contracts within Xinjiang but said in a statement that it requires clients “not to weaponize our technology and solutions and not to use them for illegal purposes, including the infringement of human rights.” The company did not explain how it enforces this requirement and declined to provide documentation describing it.
While US officials have reportedly considered adding Megvii and SenseTime to the list of entities barred from buying parts and components from US companies without government approval, they have yet to act. In a statement to BuzzFeed News, a State Department spokesperson said it has “conducted outreach to U.S. and Chinese companies with business in Xinjiang to urge them to implement human rights safeguards,” but did not specify which companies those were.
“We will continue to urge companies that do business in China to undertake human rights due diligence in line with the UN Guiding Principles on Business and Human Rights and implement safeguards to mitigate the risk that commercial activities are contributing to China’s human rights violations or abuses,” the spokesperson said.
Thus far, only one of the limited partners in a private equity fund that has backed Megvii or SenseTime said it would evaluate that investment after being contacted by BuzzFeed News. In a statement last month, the Los Angeles County Employees Retirement Association (LACERA) said it “expects all investment partners to ensure robust human rights practices,” and said it was in contact with Silver Lake, which backed SenseTime, regarding the matter.
Late last month, LACERA’s board voted to place CEO Lou Lazatin on leave, a company spokesperson confirmed to BuzzFeed News. The spokesperson declined to explain the reason for her departure or whether it was linked to LACERA’s indirect investment in SenseTime.
Meanwhile, increasing scrutiny of Chinese technology firms could affect Megvii’s financial plans. Last week the Financial Times reported that the Beijing-based company was rethinking an initial public offering, originally slated for later this year. Unnamed sources in the Financial Times report cited concerns about Megvii’s customers and the end use of its products, which include facial recognition platform Face++.
A spokesperson for Megvii declined to comment.
“We must further explore which American institutions are investing in the technology used for the tracking and monitoring of Uighurs in Xinjiang and how we can use financial pressure to discourage this abuse,” Rep. Tom Suozzi of New York told BuzzFeed News. Suozzi, a Democrat, is currently co-leading a version of the Senate’s Uyghur Human Rights Policy Act in the House with Rep. Chris Smith, a Republican from New Jersey.
BuzzFeed News found that the New York State Teachers’ Retirement System was an indirect investor in SenseTime, though Suozzi did not directly address that connection. Smith did not return a request for comment.
“One of the issues we face in bringing an end to this cycle of repression and discrimination is fully educating the public on the situation,” Ohio Rep. Steve Chabot, a supporter of the House bill, told BuzzFeed News, while acknowledging his own state’s connections to Chinese facial recognition tech. The School Employees Retirement System of Ohio and State Teachers Retirement System of Ohio are both limited partners in the Silver Lake fund that invested in SenseTime.
“Although our legislation is not yet law, I think it would be appropriate for any individual or pension fund with investments in China to ask the tough questions about where their money is going and decide if that’s how they want to invest their money,” he said.
With reporting from Megha Rajagolapan and Rosalind Adams.