The recommended agreement should permit defined verification and fraud functions, with independent supplier training disabled pending separate approval. Before activation, the parties need a documented Texas scope decision, a Brazilian processing basis and an international-transfer route. A general privacy notice cannot establish all three. (Tex. Bus. & Com. Code § 503.001(b), (c), (e); Lei 13.709/2018, Arts. 11, 33.)
Texas biometric law contains substantial AI exceptions, effective since 1 January 2026. Their application depends on what the system does. The financial exception in Chapter 503 covers specified voiceprint data, so it does not exempt these facial templates. An AI fraud function may qualify for a separate exception, including where it identifies individuals. Supplier model improvement still requires its own assessment under Texas law, Brazil’s General Personal Data Protection Law (LGPD) and any applicable financial-data restrictions. The contract should record those decisions and make retention, sharing and deletion demonstrable. (Tex. Bus. & Com. Code § 503.001(e); H.B. 149, 89th Leg., R.S., §§ 2, 10 (2025); LGPD, Arts. 6, 11, 33; 15 U.S.C. § 6802(c), (e).)
Identify the biometric operation before claiming an exception
A photograph and a face-geometry record require different treatment. Chapter 503 expressly includes records of face geometry. The supplier’s extraction of facial templates therefore brings the product within that definition. Calling the input a photograph does not change the resulting record. The photograph-related exclusions in Chapters 541 and 552 belong to those provisions; they cannot be imported into Chapter 503. (Tex. Bus. & Com. Code §§ 503.001(a)(2), 541.001(3), 552.054(a).)
The technical inventory should distinguish source images, extracted templates, matching results, fraud records and training copies. It should identify who captures each identifier and who possesses it. Chapter 503 assigns duties through those activities, rather than through the parties’ choice of controller or processor labels. Capture locations, customer locations and each party’s Texas-facing activity also need recording; Brazilian incorporation alone does not resolve territorial application. (Tex. Bus. & Com. Code § 503.001(b)–(c).)
Document one-to-one matching separately from database searches and other functions. Licentium’s analysis of an Indian KYC supplier serving an EU bank addresses that product distinction under different legislation. Texas requires its own statutory assessment.
Apply the 2026 AI exceptions separately
Section 503.001(e)(2) excludes specified biometric training, processing and storage involved in developing or offering AI models or systems. The exception stops applying where a system is used or deployed to uniquely identify a specific individual. One-to-one KYC matching should therefore be assessed against that wording. Describing it as verification does not establish the exception. (Tex. Bus. & Com. Code § 503.001(e)(2).)
Section 503.001(e)(3) provides a separate exception for developing or deploying AI for specified fraud, identity-theft, security and other illegal-activity purposes. The unique-identification qualification in paragraph (2) is not repeated in paragraph (3). An AI identity-fraud function can consequently qualify under paragraph (3) even where it identifies individuals. That requires evidence of the actual function and purpose. A general product-improvement licence cannot establish that every later use qualifies. (Tex. Bus. & Com. Code § 503.001(e)(3).)
First confirm that the relevant system meets the statutory AI definition. A stored fraud database does not become AI merely through its label. Then assess verification, fraud detection, storage and proposed training against the relevant exception. Keep any mixed-purpose or uncertain activity outside an exemption claim until its scope is resolved. (Tex. Bus. & Com. Code §§ 503.001(a)(1), (e), 551.001(1).)
Later use also matters. If identifiers captured for AI training are subsequently used commercially outside subsection (e), subsection (f) applies the possession and destruction rules and associated penalties. It does not expressly impose retrospective consent for the original capture. A new, non-exempt commercial capture must independently satisfy subsection (b). The broader framework is addressed in the Texas AI regulation hub. (Tex. Bus. & Com. Code § 503.001(b), (f).)
Financial status does not exempt facial templates
Chapter 503’s financial exception concerns voiceprint data retained by a financial institution or its affiliate. Facial geometry fails that data condition. A supplier agreement also does not establish affiliate status, which turns on the statutory control relationship. (Tex. Bus. & Com. Code § 503.001(e)(1); 15 U.S.C. § 6809(3), (6).)
The Texas Data Privacy and Security Act has a different exception for financial institutions or data subject to the Gramm-Leach-Bliley Act’s Title V. That can affect the customer, particular data held by the supplier, or both. It does not carry over into Chapter 503. The customer should identify the actual financial entity, covered information and applicable federal privacy regime. The word fintech proves none of those conditions. (Tex. Bus. & Com. Code § 541.002(b)(2); 15 U.S.C. §§ 6807, 6809(3)–(6).)
Secure capture consent and a separate disclosure route
For commercial capture outside the exceptions, Chapter 503 requires information before capture and the individual’s consent. A notice displayed somewhere on the customer’s website does not itself establish receipt of consent. The recommended onboarding design should explain the facial operation and collect an affirmative response before extraction. Keep the notice version, consent event and associated processing record. These are proposed evidence controls; Chapter 503 does not prescribe a particular checkbox or written-release form. (Tex. Bus. & Com. Code § 503.001(b).)
Public images require care. Subsection (b-1) rejects internet availability alone as informed consent unless the individual made the material public. A selfie submitted privately for onboarding does not establish that exception. (Tex. Bus. & Com. Code § 503.001(b-1).)
Disclosure has its own limits. Where Chapter 503 applies, it contains no general permission to disclose biometrics merely because the individual agrees. Its consent-based disclosure exception concerns identification following disappearance or death. Other routes include completing a financial transaction the individual requested or authorised, disclosure required or permitted by a qualifying statute, and specified warranted law-enforcement disclosure. (Tex. Bus. & Com. Code § 503.001(c)(1).)
The parties should identify the route for each transfer of a template. A transaction-related disclosure may qualify; subsequent supplier training needs a separate analysis. Federal statutory permission may matter, but only within its actual conditions. Where Regulation P applies and information was received under its transaction or fraud exceptions, its recipient-use limits are material. The service-provider route instead requires the specified notice and purpose-limited contract. Neither route automatically authorises unrelated supplier training. (15 U.S.C. § 6802(b)(2), (c), (e); 12 C.F.R. §§ 1016.1(b), 1016.11, 1016.13–.15.)
Brazilian processing needs a purpose-specific basis
Processing in Brazil can engage the LGPD even when the customers and source records are abroad. Face biometrics linked to a natural person are sensitive personal data. Their processing needs an Article 11 basis; the ordinary legitimate-interest basis in Article 7 cannot simply substitute for it. (LGPD, Arts. 3(I), 4(IV), 5(II), 7(IX), 11.)
Article 11(II)(g) permits indispensable processing for fraud prevention and the data subject’s security during identification and authentication in electronic registration systems. It preserves transparency rights and the provision’s protection of overriding fundamental rights and freedoms. The parties must connect the proposed data and retention to that defined purpose. A claim that more training data generally improves the product does not establish those conditions. (LGPD, Arts. 6(I)–(III), 9, 11(II)(g).)
If the supplier determines its own training purpose, its role must be reassessed for that activity. A processor label cannot replace the factual allocation of decisions. Where consent supplies the sensitive-data basis, it must be specific, prominent and directed to specific purposes. Generic authorisation is ineffective. Commercial product development also does not automatically qualify as research by a statutory research body. (LGPD, Arts. 5(VI)–(VII), (XVIII), 8, 11(I), (II)(c), 39.)
Keep independent model improvement outside the initial permission. A later approval should identify the dataset, purpose, role, legal basis and recipients. Removing names from reusable templates does not establish anonymity. Any claimed anonymisation needs assessment against the LGPD’s reversibility test. The separate analysis of Brazilian synthetic data for an Irish bank examines related questions about reusable outputs. (LGPD, Arts. 5(I), (III), 12.)
Authorise the return flow to Texas
Map the actual collection and transfer chain. Direct international collection and a transfer between processing agents receive different treatment under Resolution 19 of Brazil’s National Data Protection Authority (ANPD). Brazilian processing of foreign-origin data is not generally exempt. The return exception requires exclusive return to the origin, adequate protection there, application of its law and an express exception in the adequacy decision. (Resolution CD/ANPD 19/2024, Annex I, Arts. 5–8.)
Brazil’s Resolution 32/2026 recognises specified European destinations; it does not establish US adequacy. It also contains no express foreign-data return exception. A return of personal data to Texas therefore needs an applicable LGPD Article 33 mechanism. The processing basis and transfer mechanism must both be established. (LGPD, Art. 33; Resolution CD/ANPD 19/2024, Annex I, Art. 9; Resolution ANPD 32/2026, Arts. 1–2, 5.)
For this service, Brazil’s standard contractual clauses are a suitable route to assess. Use the current ANPD clauses in full, without altering their required text, and complete the actual parties, roles, purposes and security arrangements. Other contract terms must remain consistent. The US recipient must be able to comply despite applicable local laws and practices. Address onward recipients, including cloud and model providers, and the applicable Portuguese-language transparency requirements. EU clauses alone do not satisfy the Brazilian clause requirements. (Resolution CD/ANPD 19/2024, Annex I, Arts. 15–17; Annex II, clauses 1–4, 14, 18, 21–22.)
Returning only a necessary match result may reduce exposure. An identifiable result remains personal data, however, so its smaller size does not remove the transfer assessment. (LGPD, Art. 5(I), (XV).)
Tie retention to a demonstrable purpose
For identifiers subject to Chapter 503, destruction must occur within a reasonable time and no later than one year after the collection purpose expires. This is an outer limit tied to purpose expiry. It does not require a year’s storage after capture or permit indefinite storage under an undefined fraud purpose. A longer statutory document-retention period can affect the deadline only where subsection (c-1)’s conditions are met. (Tex. Bus. & Com. Code § 503.001(c)(3), (c-1).)
The customer should identify any mandatory retained record and the law requiring it. The supplier should distinguish that record from intermediate images, templates, logs and training copies. Brazilian termination and deletion rules require their own assessment, including the permitted conservation grounds. A Texas AI exception does not displace those Brazilian rules. (LGPD, Arts. 15–16; Resolution CD/ANPD 19/2024, Annex II, clause 20.)
The proposed retention schedule should assign an owner, expiry event and deletion method to each dataset. Require deletion logs, recipient confirmations, backup-expiry controls and evidence addressing copies used in training. Assess whether retained model artefacts still contain protected information. These controls document performance; neither a certificate nor the deletion of one production table proves that every relevant copy has gone.
Covered holders must also use reasonable care in storage, transmission and protection against disclosure, with protection at least equivalent to their other confidential information. Brazilian security duties apply independently. The contract should translate those standards into access restrictions, encryption, logging and tested incident procedures appropriate to the service. (Tex. Bus. & Com. Code § 503.001(c)(2); LGPD, Arts. 46–47.)
Put responsibilities and release conditions in the agreement
The service description and data-processing agreement should specify permitted functions, data categories, instructions, recipients and locations. Reserve independent training and new disclosures for a documented approval process. Allocate onboarding notices and consent delivery to the customer, with supplier support and technical enforcement before capture. Each actor remains responsible for its own statutory activities. (Tex. Bus. & Com. Code § 503.001(b)–(c); LGPD, Arts. 5(VI)–(VII), 39.)
Add security assistance, incident cooperation, rights handling, audit evidence, subcontractor restrictions and deletion on exit. Where Chapter 541 applies, section 541.104 supplies specific processor-contract requirements. Where a financial or data exception applies, the parties must identify their applicable federal and Brazilian obligations and agree the remaining commercial protections. Licentium’s Data Protection & GDPR for AI service describes related data-mapping, supplier-contract and retention work. (Tex. Bus. & Com. Code §§ 541.002(b)(2), 541.104; LGPD, Arts. 18, 39, 46.)
Enforcement should also be described accurately. Chapter 503 authorises Attorney General civil penalties of up to $25,000 per violation; it does not create a private statutory damages action. Other claims remain a separate question. A Chapter 503 violation also engages section 552.054(c). Chapter 552’s separate cure framework should not be treated as a condition of every Chapter 503 enforcement action. (Tex. Bus. & Com. Code §§ 503.001(d), 552.054(c), 552.101, 552.104.)
Before launch, approve the function and exemption memo, settle the processing and disclosure permissions, execute the transfer documents, and test consent and deletion controls. Keep supplier training disabled until its separate review is complete. This gives procurement a defined service to approve and engineering a permission boundary it can implement.
Plan the onboarding review
To review a biometric onboarding flow and the division of supplier responsibilities, contact Licentium.