A Multi-Layered Governance Framework for AML/CFT Resilience: A Narrative Review of Challenges and Effectiveness in Malaysia

Abstract

The global fight against money laundering and terrorist financing (AML/CFT) faces escalating challenges from digital assets, offshore finance, and increasingly sophisticated criminal networks. For jurisdictions such as Malaysia, a dynamic financial hub with significant Islamic finance and offshore sectors, these evolving threats intersect with governance vulnerabilities, as illustrated by the 1MDB scandal. Beyond compliance concerns, this context raises a broader regulatory governance question: how can AML/CFT systems sustain effectiveness amid institutional complexity, technological disruption, and competing normative demands? This narrative literature review synthesises and critically evaluates scholarly research on Malaysia’s AML/CFT frameworks to move beyond compartmentalised, sector-specific analysis. Drawing on legal, qualitative, and policy-oriented studies, the review integrates six interconnected themes, including the limitations of asset recovery tools, cross-border crypto and offshore risks, the dual role of technology, sector-specific vulnerabilities, systemic governance failures, and tensions between enforcement efficiency and fundamental rights. The analysis finds that regulatory effectiveness is not determined by any single legal or technological instrument. Rather, it emerges from alignment across three interdependent layers: foundational governance architecture, operational enforcement mechanisms, and normative institutional principles. Misalignment across these dimensions generates systemic vulnerability, even where formal compliance structures exist. The study contributes a multi-layered governance alignment model that conceptualises AML/CFT resilience as a dynamic institutional outcome. It calls for synchronised legal, technological, and institutional reform and highlights the need for interdisciplinary empirical research to examine cross-sectoral threat flows and enforcement trade-offs.