He questioned how MPI could have confidence in the monitoring.
Trident Systems won the contract in May. It is owned by fishing companies, with Sanford (43 per cent) the biggest shareholder.
Sanford has the largest share of New Zealand's fish quota, at 23 per cent.
"The importance of arm's-length independence appears to have been overlooked," McElderry wrote. He said Trident wouldn't satisfy the conflict-of-interest guidelines in the United States, Canada and Australia.
"Organisations responsible for monitoring fisheries are challenged in their role because the information they collect can limit economic opportunity for the fishing enterprises being monitored."
Primary Industries Minister Nathan Guy said it made no difference who owned the cameras because the footage was the important issue.
"MPI as the regulator has full access to the footage at any time and will be reviewing all the footage for non-compliance. They are in charge of enforcement and compliance - not the fishing industry.
"The footage is encrypted and cannot be tampered with or altered, and it can be used as evidence for any prosecutions.
"There are still observers on some Snapper 1 vessels on top of the cameras that provide an extra check."
But McElderry said electronic monitoring was "not fully tamper-evident, tamper-proof or fully automated".
"Monitoring programmes should not require an external audit process to 'monitor the monitors,' they should be designed so that arm's-length independence is incorporated from the start ... "
Data collection programmes are often led by the industry but efforts to expose wrongdoing was different, McElderry said in his letter.
Using observers provided by the industry would not be taken seriously, he said.
Greenpeace executive director Russell Norman said the system was not foolproof and there would be points where the monitoring company had to be relied on to operate with integrity.
"Trident has two different masters, MPI and the public whose interests were to expose wrongdoing by fishing companies, and Trident's owners who are fishing companies and have a vested interest in not having their wrongdoing exposed.
"Even with the best will in the world they [Trident's staff] are in an entirely compromised position. It's a bad practice. It's as plain as day."
Trident has the contract for snapper 1. Norman said that when contracts for monitoring all other fisheries came up it needed to be made a condition that anyone pitching had to be independent of the fishing industry.
The Government has committed to speed up the rollout of onboard cameras on the commercial fishing fleet, following an international study that estimated New Zealand's true catch was three times what was reported.
The adequacy of policing of the industry became an issue earlier this year after a 2013 Ministry for Primary Industries investigation called Operation Achilles was leaked.
It showed that five fishing vessels were caught on camera dumping large amounts of healthy fish off the coast of the South Island, but no prosecutions were taken.
The ministry has ordered a review led by former Solicitor-General Mike Heron, QC, of the Operation Achilles investigation, including the decision not to prosecute any of the fishers. Heron is expected to report back soon.
