Independent Auditor's Report on the Operation of Add-Value Services through EPS and Octopus Cards Limited's Operational Risk Control

The Hong Kong Monetary Authority (HKMA) received today (27 July) a copy of the independent auditor's report on the operation of add-value services through EPS and Octopus Cards Limited's (OCL) operational risk control.

In February, the Monetary Authority (MA) served notice to OCL under Section 59(2) of the Banking Ordinance (BO), requiring the company to submit to him an independent auditor's report. The MA also appointed Professor Chan Chi-fai of the Faculty of Business Administration of the Chinese University of Hong Kong and the Chairman of the Hong Kong Deposit Protection Board as an Advisor under Section 52(1)(B) of the BO to advise the management of OCL.

"The review conducted by the independent auditor is thorough and the recommendations appear to be appropriate and practical. The recommendations are also useful input for the ongoing supervision of OCL," said an HKMA spokesperson.

The HKMA will require OCL to commit to a clear timetable for the implementation of the report recommendations and will closely monitor the progress of implementation.

In the meantime, the appointment of the Advisor, whose terms include advising OCL on the implementation of recommendations of the Section 59(2) report, will remain in force until OCL has satisfactorily implemented all the recommendations.

The HKMA notes that OCL will immediately proceed to refund all affected cardholders of incomplete EPS add-value transactions identified through the review. The HKMA will monitor the refund process closely.

"Refunds should be made to the affected cardholders as soon as possible," said an HKMA spokesperson. "The EPS add-value service will continue to be suspended until all the necessary remedial measures have been implemented," he added.

For further enquiries, please contact:
Thomas Chan, Senior Manager (Press), at 2878 1480 or
Hing-fung Wong, Officer (Press), at 2878 1802

Hong Kong Monetary Authority
27 July 2007