Preheat the oven to 350°F (175°C). Grease and flour two 9-inch round cake pans.
In a large bowl, cream together the butter and sugar until light and fluffy. Beat in the eggs one at a time, then stir in the vanilla extract.
Combine the flour, baking powder, baking soda, and salt; gradually mix into the batter. Stir in the coconut milk and shredded coconut.
Pour the batter evenly into the prepared pans. Bake for 25-30 minutes or until a toothpick inserted into the center comes out clean.
Allow the cakes to cool in the pans for 10 minutes, then remove from the pans and transfer to a wire rack to cool completely.
In a mixing bowl, whip together the sour cream, heavy cream, and powdered sugar until stiff peaks form.
Place one cake layer on a serving plate, spread a layer of whipped cream mixture over the top, then place the second cake layer on top. Use the remaining whipped cream to frost the top and sides of the cake.
Sprinkle toasted coconut flakes over the top of the cake for garnish. Chill in the refrigerator before serving.