A facial recognition database of more than three billion images, including Australians, has been slapped down by the privacy watchdog as "unreasonably intrusive and unfair".
The privacy commissioner's ruling was handed down after a joint international investigation into the unauthorised use of Australian and British faces in the biometric database.
It comes as Facebook announced it was closing its facial recognition capability by the end of the year, citing growing societal concerns about the use of such technology.
US-based tech startup Clearview AI first began shopping their system to law enforcement agencies around the world as a one-stop shop for biometric identification, after scraping billions of images of people from social media and professional networking sites.
The company remained relatively unknown until a New York Times article revealed in early 2020 it was being trialled by thousands of law enforcement and security agencies, including federal and state police officers in Australia.
One of its founders, Hoan Ton-That, had developed an algorithm capable of using the large database of internet images to find matches to faces uploaded by police officers.
It prompted criticism from privacy and human rights experts over the unauthorised use of millions of people's biometric information.
The Office of the Information Commissioner announced it was launching a joint investigation with UK authorities in July last year to determine whether the biometric information of Australians had also been captured within the database.
Commissioner Angelene Falk announced on Wednesday the year-long investigation had concluded the tech startup had breached the privacy of Australians.
But Clearview AI has rejected the privacy commissioner's ruling, saying it had "not correctly understood" its business and "missed the mark".
A spokesperson said it would seek to review the decision through the Administrative Appeals Tribunal.
The watchdog's investigation found Clearview AI's use of facial recognition was not necessary, legitimate, proportionate nor having regard to any public interest benefits.
It has been directed to destroy any images of Australians held within the database.
"The covert collection of this kind of sensitive information is unreasonably intrusive and unfair," she said.
"It carries significant risk of harm to individuals, including vulnerable groups such as children and victims of crime, whose images can be searched on Clearview AI's database.
"By its nature, this biometric identity information cannot be reissued or cancelled and may also be replicated and used for identity theft. Individuals featured in the database may also be at risk of misidentification.
"These practices fall well short of Australians' expectations for the protection of their personal information."
The office did not reveal how many Australian images had been scraped into the database.
In a statement on Wednesday, Mr Ton-That, a dual Australian citizen, said he was "disheartened" by the investigation's findings.
"My company and I have acted in the best interests of these two nations and their people by assisting law enforcement in solving heinous crimes against children, seniors and other victims of unscrupulous acts," he said.
"I look forward to engaging in conversation with leaders and lawmakers to fully discuss the privacy issues, so the true value of Clearview AI's technology, which has proven so essential to law enforcement, can continue to make communities safe."
It follows shortly after convenience chain 7-Eleven was rapped over the knuckles by the Information Commissioner last month for collecting customers' facial images and faceprints in their feedback service.
Ms Falk said 7-Eleven's use of the technology last year was also not proportional or necessary.
A parliamentary committee shut down a government proposal in 2019 to introduce a facial verification database, named "the Capability", for identity-matching services and criminal investigations after concerns it was too far-reaching.
Passports and state drivers licenses have since been uploaded to the Home Affairs-owned database, which is not yet operational until legislation passes parliament.
The federal government has yet to reintroduce a bill for its identity matching program.
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