The rules on homoglyph domain registration need to be tightened up and enforced.[1] As usual, ICANN is soft on making registrars obey rules. That's where the blame lies.
IMO it'd be fine if there was an automated flagging mechanism that would require manual review for suspicious domains, though. But good luck getting registrars to do anything more involved than a simple blacklist check.
It would absolutely have to be a pretty labor-intensive, manually-maintained database.