The fundamental problem here is that these regulations are totally useless. Look into the effectiveness of KYC laws -- they're basically zero percent effective.

And the reason for that is that if anybody knew that somebody was engaged in criminal activity, they wouldn't have their bank account closed, they would be arrested and their finances seized by court order. So the bank account closures only happen to people for whom there is not enough evidence to charge them with a crime. In other words, a ton of innocent people.

Conversely, the bank is not a law enforcement agency and has no real way to distinguish between the kind of criminals who know how not to be obvious and the aforementioned totally innocent people, and if anything the practiced criminals are the ones who know how not to trigger the fraud detection algorithms, unlike the innocent people.

So the criminals don't get caught and the government blames the banks for this, but the banks still don't have any good way to know who the criminals actually are, so all they can ever do is round up random innocent people to put on a show of punishing somebody.

The fraud is that law enforcement should be an obligation of the banking system and that fraud needs to be eliminated.

> imagine if some bank knowingly facilitated money laundering

You won't have to imagine very hard, HSBC was caught laundering money, told they had to strengthen their controls, but ultimately all the Justice Department wanted was a small cut of the action in the form of fines and HSBC has been allowed to continue their corrupt practices even after being caught laundering money again and again (in addition to all kinds of other crimes). It seems like as long as they can pay the fines, banks are basically above the law.