Microsoft to divest from Israeli facial recognition startup

TEL AVIV - Microsoft announced on Friday that it would divest from Anyvision, a controversial Israeli facial-recognition startup that scans the faces of Palestinians at military checkpoints in the Israeli-occupied West Bank. Microsoft also said it would no longer make minority investments in companies that sell facial recognition technology.

However, the tech giant said it had not been able to substantiate claims made by activists and Palestine solidarity campaigners that the company's technology was used unethically, after hiring former US Attorney General Eric Holder and a team of lawyers to audit the firm.

The decision marks a policy change for the Redmond, Washington-based software maker, which has aimed to shape how the technology industry approaches facial recognition. Microsoft has laid out principles to guide its own development of the technology, saying it should perform without bias and must not impinge on democratic freedoms.

Civil liberties groups have said police use of facial recognition could lead to unfair, arbitrary arrests and limit freedom of expression. Microsoft faced criticism last summer for participating in a $74 million funding round for AnyVision, which critics said contradicted the company's stated principles.

AnyVision, based outside Tel Aviv, came under scrutiny following media reports that its technology was used by Israeli authorities to surveil Palestinians, after Israel's military occupation forces installed face scanners at border crossings where Palestinians enter Israeli territory from the occupied West Bank.

Microsoft asked Holder and a team of lawyers to investigate the claims in October, to determine whether AnyVision’s technology applications comply with Microsoft’s ethical principles against using facial recognition for mass surveillance.

A statement from the Washington-based law firm Covington & Burling, where Holder works, said that available evidence “demonstrates that AnyVision's technology has not previously and does not currently power a mass surveillance program in the West Bank that has been alleged in media reports.” The law firm said the audit included a review of accounting records and a site visit to AnyVision's facilities in Holon, Israel.

Microsoft and AnyVision also jointly announced Friday that the audit didn't substantiate any breach of Microsoft's principles. Even so, Microsoft said that as a result of the probe it decided to exit the business of investing in facial recognition startups altogether.

"For Microsoft, the audit process reinforced the challenges of being a minority investor in a company that sells sensitive technology, since such investments do not generally allow for the level of oversight or control that Microsoft exercises over the use of its own technology," Microsoft and AnyVision said in a joint statement posted on the website of M12, Microsoft's venture fund.

Microsoft did not have a timeline to share for when the divestment will occur and who will buy its stake, a spokesman said. It was not immediately clear if other M12 investments were impacted by the policy change.

While Microsoft has turned down some facial recognition sales on human rights grounds, such as declining a deal for the capital city of a country that nonprofit Freedom House said was not free, it continues to develop the software for other commercial and public sector uses.

Microsoft said there was no change to its internal work on facial recognition.