Bitcoin associated with criminal transactions are worth less than "clean" bitcoin. so they are not fungible. All bitcoin outputs are naturally NFTs, for example see Colored Coins or Ordinals.
Some exchanges and banks to trace lets say the last 20 hops, and if these are OK, then they accept the coin. I know also about institutions which trace ALL hops, meaning: At their desk you cant ever sell a coin that has been in the dark only one day since its existance.
Most have a relaxed approach, like "if the coin wasnt in dirty hands for the last 5 or 6, its OK for us"