I used to view things exactly like you did. I was a big Bitcoin user as well. I read Treasury's War and it sickened me. AML is indeed a parallel quasi-judicial system except without the good bits of the actual judicial system, and poses many civil liberties concerns.
However, I learned with time that it's not as ineffective as it looks. Governments around the world have adopted AML laws, and with less pressure from the US than is commonly believed. They aren't all stupid. These laws are not a total failure and do raise the bar for organised crime significantly.
If you look at the stories of some of the world's highest profile crime lords, they do in fact struggle significantly to launder their money, often in ways that make it appear unclear what their planned end-game was (perhaps they didn't have one). Here are two examples:
1. Ross Ulbricht, poster child of the AML-free world. Ran a major drug market online. When
arrested he was Bitcoin-rich and dollar poor, living like a student in San Francisco. He had been able to convert very little of his gains into real-world wealth that a crime lord might want, like houses, planes, boats, or whatever it is people plan to do with the proceeds of crime.
2. Paul le Roux. A much more successful gang leader than Ulbricht, yet when finally captured it was discovered most of his wealth was in the form of balls of precious metals under guard. He lived in fear of his guards turning on him and stealing his wealth. IIRC there was some evidence this happened, and he reached a point where he couldn't physically reach the safe houses anyway. Again, although powerful, he was not actually living the high life in the ways that might make doing such crimes attractive to most people. And there is no really good way to convert large amounts of precious metals into more useful forms of wealth without attracting a great deal of attention.
Money laundering is like any form of crime fighting. It raises the bar. Ransomware exploded after cryptocurrency came on the scene because cryptocurrency makes AML much harder. You didn't see people regularly being held to ransom via PayPal, did you? In fact blackmail/extortion for physical cash is quite rare because obtaining the money always involves walking into a police trap. One of the many reasons I eventually got tired of the Bitcoin community was their absolute and total refusal to consider the physical safety issue: having lots of crypto just is not safe, in the sense that kidnapping your wife or kids to extract the coins from you is an actually viable strategy, whereas trying to extract money from a rich guy via a credit card or wire transfer is just a joke, it will never happen. You'd be caught immediately.