Izany Abdul Ghany, Kuala Lumpur's police chief for commercial crimes investigations, said Wednesday that police were acting upon a complaint made by another official within the Asian Football Confederation.
Izany told The Associated Press that an AFC audit found the official — who police would not name during the early stages of investigation — fraudulently transferred confederation funds to bank accounts abroad in 2008.
He added that the official, who is not Malaysian, could be charged with criminal breach of trust, which carries a possible prison sentence.
Izany said the investigation will likely take months to complete.
AFC representatives did not immediately respond to a request for comment.
The latest graft allegation follows corruption accusations levelled against the AFC's suspended president Mohamed bin Hammam.
Bin Hammam has insisted that accusations he enriched his family and supporters while president of Asian football were politically motivated.
In a letter this month to 20 Asian associations, bin Hammam confirmed he made payments to officials and others but said they came out of his own bank accounts and were personal.
He claimed the payments were driven by a desire to help those in need, including Zhang Jilong, the current AFC president.
It was Zhang who ordered an audit that accused bin Hammam of receiving millions of dollars from individuals linked to AFC contracts and spending tens of thousands on items such as a honeymoon and cash payments for his family.
Bin Hammam had a lifetime ban from the sport overturned in court in July. That ban was initially imposed after FIFA found he had bribed Caribbean voters when he challenged Sepp Blatter for the FIFA presidency.