You cannot fully trace every transaction. Transactions can happen off-chain, and transactions can be mixed. If I have an output of 1 BTC, and I want to send yo

You cannot fully trace every transaction. Transactions can happen off-chain, and transactions can be mixed. If I have an output of 1 BTC, and I want to send you 0.3 BTC, then that 1 BTC gets split up in 0.3 and 0.7BTC the 0.3 goes to your address, the 0.7 goes to a new address belonging to me. If that 1 BTC was "known bad" is the 0.3 BTC now also "known bad"? Also, for the outside it is a guess whether the 0.3BTC or the 0.7BTC transaction was my "change". You cannot fully trace every transaction. You can just find every other transaction it was linked to. That list grows somewhat big.