By Iva Karen
KUALA LUMPUR, June 11: In an era where financial systems span continents and transactions occur in milliseconds, tracing the true source of funds (SoF) has evolved from a straightforward task into a complex, multidimensional process.
The president of Transparency International Malaysia (TI-M) Raymon Ram said whether for regulatory compliance, fraud detection or efforts to combat money laundering, the analysis of where money comes from and how it moves is now a critical part of governance within financial institutions and law enforcement agencies.
He said, traditionally, investigators relied on well-established techniques such as transaction chaining, which involves tracking the movement of money across various accounts and jurisdictions by analysing bank statements and wire transfers.
“Public records, including corporate registries and property databases, have also been instrumental in exposing the individuals or shell entities behind suspicious transactions.
“While these tools remain essential, they often fall short when funds enter opaque jurisdictions or become mingled with legitimate income,” he said.
To overcome these limitations, Raymon said, investigators have turned to accounting models such as FIFO (First In, First Out) and LIFO (Last In, First Out), as well as advanced data visualisation tools that reveal patterns traditional spreadsheets might miss.
“A key development in recent years has been the growing use of blockchain analytics. Unlike conventional banking systems, blockchain ledgers are decentralised, transparent, and immutable, allowing investigators to trace transactions with unprecedented clarity.
“Tools like Chainalysis, Elliptic and TRM Labs enable forensic teams to cluster wallets, monitor high-risk addresses, and track asset flows across blockchains, even in cases where users attempt to obscure identities through mixing services or cross-chain transactions,” he explained.
He highlighted that, one of the advantages of blockchain analytics is the real-time visibility it offers.
“Since data is recorded on a public ledger, investigators do not need to wait for bank cooperation or legal subpoenas to begin analysis. However, pseudonymity remains a significant challenge, requiring additional intelligence from cryptocurrency exchanges or off-chain data sources,” he said.
Rather than choosing between traditional and digital approaches, Raymon said the most effective SoF investigations are hybrid in nature, for instance, a suspicious bank deposit might be followed into a cryptocurrency exchange, tracked across blockchain wallets, and ultimately linked back to a real-world individual through legal channels.
“This convergence is crucial as criminals increasingly exploit the gaps between traditional and decentralised finance to conceal illicit wealth. Investigative strategies must therefore be equally fluid and adaptive.
“In Malaysia, laws such as the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act (AMLA), along with recent updates to the Companies Act, underscore the need for transparency in beneficial ownership and large-value transactions, particularly those involving politically exposed persons (PEPs),” he said.
–WE