It's still a crime though right? You can't launder money for a criminal and say you did nothing wrong.
What you do is to create a process for KYC where you check against lists of threats like known terrorists or sanctioned persons, companies and governments.
For example you check if your client lives in Crimea or Cuba, if so the dealings with them need to be limited in accordance of the jurisdiction trade in.
You also need to look out for suspicious transactions and block or maybe report those, for example if a local barbershop business is moving a lot of gold, you are supposed to catch that.
There are a lot of companies and startups in the area who make tools to streamline this process. Since there’s no standardization across the globe, you need to build systems that can catch names that went through multiple transliterations or create statistical models to detects unusual activity and so on.
Source: I know people in the business.
I'm sorry to disappoint you but the governmental organisations don't have the thigh grip on citizens that Facebook or Google have on their users.
This citizen control business is made of thousands of organisations that often work against each other. Significantly more vibrant space than the internet of 2021, a lot of userbase shifts are happening all the time. Lock-ins are softer than those of Google, visas and migration agreements give space to a lot of user flow between those.
There's no monopoly or central organisation to stream peoples lives to.
Anti-money laundering laws 100% turn the presumption of innocence on its head. You are presumed guilty, and forced to surrender your privacy, until you prove yourself innocent.
The western world is a bureaucratic hell for people from Syria, Iran, North Korea, Cuba, Irak etc.
If you are from country A that doesn't share data with country B and you want to live/work/do business in country B, the bureaucracy can also be heavier since it's going to be harder asses your situation. You might be asked to explain what you do, why do you want to use their services and even prove your claims if you want to be accepted as a customer.
That's something that no one likes. Banks like making money and yo don't make money by refusing work, so they will do the bare minimum to cover their asses but sometimes the cover needed can be quite large.
From reports from other crypto investors, I would also suspect that the investment also wasn't limited to buying on a mainstream exchange, but buying crypto from people directly with cash transfers or trading back and forth directly between less mainstream currencies.
Crypto trading is high-suspicion for two reasons - its very easy to claim a windfall has come from off-book crypto-trading when its actually profits from crime.
It is also very easy to be caught up with illegal transfers of money from other countries or to proscribed organisations when transfering money directly.
Clearly OP isn't involved in either of these illegal activities, otherwise they wouldn't have passed KYC, but it seems reasonable that they would have had to jump through some hoops to demonstrate that their activities were indeed legitimate and above board.
I would suggest that their personal experience is not representative of the thoroughness of the KYC process most people would go experience.
Unacceptable in a free society. Probable cause is not reasonably construed based on these types of crude generalizations.
Due process means only a court can judge there to be probable cause, and that a search can only be done after it issues a warrant. A court would never rule probable to exist based on the type of formulaic rationale you're using.
The kind of KYC scrutiny innocent people are subjected to, based on much flimsier bases than even you have speculated existed in my case, is obscene.
When the private financial interactions and investment strategies of every one become privy en masse to a self-appointed class of surveillance agents, it creates information asymmetries between the general citizenry and those close to the state/regulated-industries. And information asymmetries lead to wealth and power disparities.
The surveillance state you are championing will inevitably lead to wealth and power concentrating into the hands of a tiny cadre of privileged insiders and that will lead to massive economic waste from rent-seeking and social instability.
There is no future for a liberal democratic society if the trend toward unchecked surveillance powers for the state is not arrested and reversed.
Except they can (in practice and in contradiction to rules), and have done similar things in the past. The system really doesn't care about people's rights, mistakes are endemic and ignored, and it is more interested punishing people or collecting money than actual justice. At least that has been my experience.
The benefits that society provides (roads, money, safety) come at the cost of not being anonymous (car registration, passports, KYC).