This is not a discussion of protocols, it's a discussion of being associated with known bad actors. Suppose that I have a history of doing semi-illegal things

This is not a discussion of protocols, it's a discussion of being associated with known bad actors. Suppose that I have a history of doing semi-illegal things and that my wallet is publicly associated with real personhood. Example. gretch = id 1234; buys drugs which are legal in country x and highly illegal elsewhere Now one day I come to your completely legal business and make a completely legal transaction Example. I come to your bakery and get my wedding catered Now you just received a lot of money from an account which is on several bad actor lists and you have to explain what happened. Okay, you can try to explain that the services rendered were completely legitimate; hopefully the investigators will believe you because that's what all money launderers try to do. Alternatively, you as the caterer need to research the actor behind incoming transaction for your innocuous service.