This paper presents a biometric encryption system that addresses the privacy concern in the deployment of the face recognition technology in real-world systems. In particular, we focus on a self-exclusion scenario (a special application of watch-list) of face recognition and propose a novel design of a biometric encryption system deployed with a face recognition system under constrained conditions. From a system perspective, we investigate issues ranging from image preprocessing, feature extraction, to cryptography, error-correcting coding/decoding, key binding, and bit allocation. In simulation studies, the proposed biometric encryption system is tested on the CMU PIE face database. An important observation from the simulation results is that in the proposed system, the biometric encryption module tends to significantly reduce the false acceptance rate with a marginal increase in the false rejection rate.