The Chinese artificial intelligence startup was supposed to price shares Friday in its initial public offering in Hong Kong, where it planned to raise up to $767 million.
But its preparations to go public were overshadowed by news that Washington was adding SenseTime to another trading blacklist.
The US Treasury department confirmed Friday that it had decided to place the company on a list of “Chinese military-industrial complex companies,” in which US President Joe Biden has banned Americans from investing.
The US Treasury said SenseTime was sanctioned because of the role its technology plays in enabling human rights abuses against the Uyghurs and other Muslim minorities in Xinjiang.
“SenseTime … owns Shenzhen Sensetime Technology Co. Ltd., which has developed facial recognition programs that can determine a target’s ethnicity, with a particular focus on identifying ethnic Uyghurs,” the department said in a statement. “When applying for patent applications, Shenzhen Sensetime Technology Co. Ltd. has highlighted its ability to identify Uyghurs wearing beards, sunglasses, and masks.”
In a statement Saturday, SenseTime said that “we strongly oppose the designation and accusations that have been made in connection with it.”
“The accusations are unfounded and reflect a fundamental misunderstanding of our company,” it added. “We regret to have been caught in the middle of geopolitical disputes.”
The firm also vowed to “take appropriate action to protect the interests of our company and our stakeholders,” without elaborating further.
SenseTime added that it operated “as a software company committed to promoting sustainable, responsible and ethical use of AI,” which has “complied with the applicable laws and regulations … in the jurisdictions where we conduct business.”
The company said it had formed an “AI Ethics Council, comprising both internal and external experts, [which] ensures that our business strictly adheres to recognized ethical principles and standards.”
The company has previously said that it has developed its “AI code of ethics to ensure our technologies are used in a responsible way,” and has said that sales to customers in Xinjiang have been in compliance with Chinese law.
The company also claimed that “none of our material investors, customers or suppliers had withdrawn their investment or ceased doing business with us due to the Entity List addition.”
But it has acknowledged potential headwinds, saying that “we are subject to the risks associated with international trade policies, geopolitics and trade protection measures, and our business, financial condition and results of operations could be adversely affected.”
AI under scrutiny
But the firm is best known for its facial recognition software, which has long been subject to controversy.
In a statement at the time, SenseTime told CNN Business that the reference to Uyghurs was “regrettable,” adding that it was “one of the examples within the application intended to illustrate the attributes the algorithm recognizes.”
“It was neither designed nor intended in any way to discriminate, which is against our values,” a spokesperson said. “We will update the patent at the next available opportunity.”
More recently in its investment prospectus, SenseTime said that its “previous sales to customers in Xinjiang were in compliance with” Chinese laws, and that income from those sales were less than 1% over the last three years.
SenseTime was due to start trading in Hong Kong on Friday, December 17.
— Brian Fung and Ben Westcott contributed to this report.