There are limits. For one, there's atmospheric effects that scatter light in visible wavelength spectrum. You might be able to penetrate clouds and haze easier in the lower end of the spectrum and towards the infrared wavelengths, and those might still be usable for facial recognition though. Another limit is aperture of optical equipment used to take photographs, in case of telescopes, that's given by the Dawes' limit and is derived from Rayleigh criterion to compute angular resolution of imaging devices. So the end resolution depends on weather, imaging wavelength, atmospheric scattering, distance, and diameter of primary mirror (aperture). Build quality obviously also has a major role.
But let's first see what's the absolute minimum resolution we'd require to recognize facial features and successfully identify individuals. According to this article, to do that, we'd need to resolve a human face to a resolution of at least 40x40 pixels. So if we say that an average adult human face is 20 cm wide, we should resolve to within 5 mm. At also extremely low LEO orbits that might be used by some surveying satellites, say 200 km above the surface of the Earth during perigee of highly elliptical Molniya orbits, this gives us a required angular resolution of $3.0\cdot 10^{-8}\text{ rad}$, or $0.00618794419\text { arc}$ (in radians and arcseconds, respectively).
Using Dawes' limit, we can then calculate theoretical minimum telescope's aperture (in centimeters):
$$D = \frac{11.6}{R} = \frac{11.6}{0.00618794419} = 1,874.6\text{ cm}$$
Or roughly 18.7 m (738 inch, 61.5 ft, 20.5 yard) diameter telescope. Not impossible, but such huge telescope would certainly be visible even with a naked eye (remember, that's minimum diameter, it would be by far taller than that) if it caught reflection, and that's usually not an option with military spy satellites we might not be aware of, while there certainly aren't any such commercial and/or scientific telescopes in orbit.
Considering I took the most extreme and ideal case examples into consideration for the sake of argument, and the numbers are an order of magnitude smaller than what David Hammen came out with in his answer because of that, the answer is still:
No, there is no such optical telescope in Earth's orbit with required resolution to identify individuals by their facial features. If it was, we'd know about it.
One thing that shouldn't be forgotten is that satellites can't simply change orbits and be at any place and at any time they'd need to be, to track and identify individuals even if they could do that by their facial features alone. If someone is going to put so capable optical equipment in the skies, it would more likely be on inconspicuously painted blimps / aerostats that could silently hover at a lot smaller altitudes, image targets from a shallow angle, and follow their movement easier. And all of that with a lot cheaper, smaller and harder to notice equipment. Or use helicopters, drones, CCTV,... or good old boots on the ground.