I did a transfer on Local Bitcoins a couple of days ago and it worked fine. I suggest that you require that traders submit a picture of government-issued ID when they purchase for the first time (or if they have a low number of trades). That way, if the funds get frozen by your bank you'll have some evidence of the fraud.

Buying the coins with cash should be safe but I suggest you follow the guide https://localbitcoins.com/guides/cash-exchange-howto on their website on how to conduct the trades safely.

Also, just because I'm curious, what happened on Mt Gox?