Apart from the fact it would look suspicious walking up to a BTC ATM with a duffle bag full of $$$ - whats stopping these people converting their cash reserves to BTC?
They have other ways of doing this without the daily limits of ATMs. If you are an early Bitcoin holder seeking to sell your coins (bulk amounts) for cash, you will eventually encounter these shady types. Maybe not the criminals directly, but some intermediary who gets their cash supply directly from the criminals.