That doesn't sound quite right. If everyone did it, there would be no correlation between funding and reputation and power, and there just wouldn't be much rep

That doesn't sound quite right. If everyone did it, there would be no correlation between funding and reputation and power, and there just wouldn't be much reputation for someone to try to launder in this way. But everyone doesn't do it, and so we have this norm about how if someone X is an investor of Y, then some of Y's reputation transfers to X -- we assume Y did due diligence on X for us. The problem exists because accepting morally tainted money isn't a norm. (I'm not arguing that it should be!)