AI Enterprises May Face Data Compliance Challenges In The First Round Of Technology IPO Inquiry

? ? ? On the evening of May 28, Kuangshi disclosed 560 pages of questions and answers in the first round of the science and technology innovation board, which involved issues of data compliance and technology ethics.

? ? ? The Shanghai stock exchange requires the company to explain the specific links involved in data collection, cleaning, management and application in its technology, business and products (or services), as well as the specific types of data involved in different links, as well as the specific situations of text, image, video, etc; Relevant data sources and compliance; Ensure compliance measures in data collection, cleaning, management and application; As well as the litigation or dispute of data compliance.

This is the second time that Kuangshi has impacted the IPO, and the tortuous path of its IPO may be related to the personal data and privacy security problems it faces.

Just three days after the IPO of Kuangshi technology innovation board was accepted by Shanghai Stock Exchange, the "315 party" revealed that merchants illegally collected faces, causing social concerns about the abuse of face recognition. Previously, Kuangshi technology was twice questioned by the public for being accused of violating privacy through video surveillance and Li Kaifu's "slip of the tongue" incident.

In recent years, the global artificial intelligence market scale continues to grow, unicorn enterprises have taken advantage of the east wind to emerge. But after the wave of landing applications, many companies fell. With the increasing security concerns of face recognition abuse, the regulatory and compliance challenges faced by enterprises will also follow.

First round inquiry focuses on data compliance

Beijing Kuangshi Technology Co., Ltd., founded in 2011, is known to the public for face recognition and object recognition detection. In the field of computer vision in China, it is called "Ai four little dragons" together with Shangtang technology, Yitu technology and Yuncong technology. According to IDC statistics, Kuangshi technology accounted for 15.2% of China's computer vision application market share in 2019, ranking second only to Shangtang technology.

On the evening of May 28, Kuangshi disclosed 560 pages of questions and answers in the first round of the science and technology innovation board, which involved issues of data compliance and technology ethics.

According to the prospectus, the core technology of artificial intelligence includes system layer and algorithm layer, involving data processing, cleaning and management capabilities, computing power sharing, scheduling and distribution capabilities, and algorithm training, reasoning and deployment capabilities.

Therefore, the Shanghai stock exchange requires the technology to explain the specific links involved in data collection, cleaning, management and application in its technology, business and products (or services), as well as the specific types of data involved in different links, as well as the specific situations such as text, image, video, etc; Relevant data sources and compliance; Ensure compliance measures in data collection, cleaning, management and application; Situations and scenarios involving user's personal data in the product (or service), the use, management and compliance of such data; As well as the litigation or dispute of data compliance.

It is worth noting that in its reply, Kuangshi responded to the previous news report that revealed face recognition in sales offices, which has triggered a large-scale discussion on standardizing the use of face recognition in the society.

According to the report, several sales offices of real estate enterprises have installed cameras produced by Kuangshi technology to recognize the faces of visitors and take "insensible" shots to distinguish the source of customers and give them different preferential policies.

But Kuangshi has denied that there have been lawsuits or disputes over data compliance. In response to the report, Kuangshi said it was only a product provider, not a collector and user of relevant personal information. The company has neither participated in the design and development of such face recognition systems, nor has it been able to access and process (nor have ever been exposed to and processed) relevant data. In addition, the cooperation agreement signed between the company and a third party has clearly stipulated that the third party and its customers shall "use the product in a lawful way" (including but not limited to the express consent of the subject of the collected personal information), and shall not use the product in any way that violates the law or infringes the legitimate rights of the third party.

Therefore, Kuangshi believes that the enterprises that are the builders and controllers of the face recognition system should be responsible for their related behaviors.

Tortuous way of listing

Kuangshi's IPO journey started on August 25, 2019, and the company submitted its first prospectus to the Hong Kong stock exchange.

More than a month later, the U.S. Department of Commerce included 28 Chinese enterprises, including Kuangshi technology, in the "entity list" of export control.

In the end, Kuangshi failed to complete the listing of Hong Kong shares within the validity period of the listing application materials, and changed its listing to mainland a shares in May 2020.

Ignoring the tortuous road of technology IPO may also be related to the personal data and privacy security problems.

On March 12, the IPO of Kuangshi technology innovation board was accepted by Shanghai Stock Exchange. Three days later, the "315 party" revealed that Kohler bathroom, BMW 4S shop and other businesses illegally collected faces, focusing the public's attention on the risk of face recognition abuse.

In the prospectus of Kuangshi technology, dozens of patents for capturing, detecting and recognizing face are listed. However, there is no positive response to the external concerns about how to ensure the safety of data acquisition and processing of face recognition. Kuangshi said that it is spending 2 million to develop the artificial intelligence security and Ethics Research Center project, which will "establish a set of relevant AI data security and privacy protection mechanism, and effectively solve data security and personal privacy issues".

At the same time, it reminds that although the company is constantly strengthening the security construction of information system, it may still be attacked by malicious software, viruses, large-scale hackers, or due to improper management and disposal of employees, resulting in information leakage and loss.

This may be one of the reasons why the Shanghai Stock Exchange asked Kuangshi to give a full and reasonable response to data compliance in the subsequent inquiry.

As a matter of fact, the privacy crisis of the users of the technology has been on the horizon for a few years. In September 2019, an image with a "megvii wide view" icon and video monitoring students' classroom activities was accused of violating privacy. The picture shows that the technology can analyze the students' facial features and recognize the behaviors of raising hands, playing with mobile phones, sleeping, listening and reading. Kuangshi responded that the online pictures are only technology scenario concept demonstration, and its campus oriented products are mainly used to ensure the safety of students.

In September 2020, Kaifu Lee, chairman and CEO of Innovation workshop, once again poked the hornet's nest with a sentence that "once helped Kuangshi technology company find partners including Meitu and ant financial to get face data". Although Kaifu Lee immediately apologized to the three companies to clarify his mistake; Ant group official voice, never provided any face data to Kuangshi technology; Kuangshi also said that it did not grasp and would not actively collect any personal information of end users, but the public's sense of distrust has further intensified.

Regulatory and compliance challenges

In recent years, the scale of China's artificial intelligence market continues to grow.

According to IDC data, the market scale of China's artificial intelligence software and application will reach 2.89 billion US dollars in 2019, including hardware, and the overall market size will reach 6 billion US dollars. By 2024, the scale of China's AI software and application market will reach US $12.75 billion, with a compound growth rate of 39.0% from 2018 to 2024. Among them, computer vision is an important part of China's artificial intelligence market. In 2019, China's computer vision application market will exceed 1.45 billion US dollars.

"Ai four little dragons" and other Unicorn enterprises have taken advantage of the east wind to come to the fore. After early concept speculation, technology accumulation, investment and financing boom, they will enter the deep water area around 2020.

However, in the past, the AI enterprises that "rushed to the market" failed to IPO one after another. In addition to kuangzhi technology and Yuncong technology, the latter previously suspended the audit because "the financial information recorded in the application documents for IPO has expired" and resumed on June 2. The current audit status is "inquired". Shangtang technology has not disclosed its listing plan. Yitu technology suddenly applied for suspension of IPO on March 11, while yunzhisheng and Hesai technology have terminated their listing.

With the increasing security concerns of face recognition abuse, the regulatory and compliance challenges faced by enterprises will also follow.

At the national level, the "personal information security specification" issued by the General Administration of market supervision has already clearly stipulated that face information belongs to personal biometric identification information and also belongs to personal sensitive information. When collecting face information, the authorization and consent of the personal information subject should be obtained. Article 27 of the draft personal information protection law, which is still under deliberation, also has special provisions on face recognition, which requires that the installation of image acquisition and personal identification equipment in public places shall be subject to the individual's separate consent or unless otherwise stipulated by laws and administrative regulations.

On April 23, the draft of the national standard of information security technology for face recognition data security requirements (hereinafter referred to as the "national standard") was released. It pointed out that explicit consent should be obtained when collecting face recognition data, and face recognition data should not be used to evaluate or predict the work performance, economic status, health status, preference, interest and other conditions of the data subject.

In addition, when collecting face recognition data in public places, the national standard requires that the data subject should actively cooperate (that is, the data subject is required to look directly at the collection equipment and make a specific posture and expression, or through a special collection channel marked with "face recognition") for face recognition. If the developer wants to store the face image, it needs to obtain the written permission of the data subject. The introduction of these regulations will prevent face data from being collected when they are not informed, and protect the right of informed consent of data subjects.

Many places also have their own standards in sales offices, shopping malls, residential property management and other scenarios of face recognition applications.

Hangzhou property management regulations (Revised Draft) submitted for deliberation on April 26 stipulates that property service personnel shall not force owners to use common facilities and equipment by means of fingerprint, face recognition and other biometric information, so as to ensure the normal use of common facilities and equipment.

On March 12, in order to prevent the improper collection of surveillance images in public places from seriously infringing on personal privacy, the regulations on the administration of public security video image information system in Shenzhen Special Economic Zone (Draft) solicited public opinions, limiting the scope of installing public security video image information system, and stipulating that no unit or individual may illegally use the collected information to conduct image-based, video image-based and image-based information systems Personal identification of sensitive information such as human body and license plate; When sensitive video image information such as human image, human body and license plate is required to be used for public communication, protective measures should be taken to prevent the specific individual from being identified and cannot be restored, unless otherwise stipulated by laws and regulations.

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