If someone were to take out a lot of cash from the bank, there are reporting requirements the bank has to follow. If someone were to take out smaller amounts of cash in order to avoid the reporting thresholds, there are other reporting requirements.
If someone is laundering dirty cash, from selling drugs for example, then the money is not being withdrawn from a bank, so my point still stands. If this were actually about preventing money laundering, then they would have forced similar regulations (KYC at point of spending) on cash transactions a long time ago, given that cash continues to be the dominant platform for money launderers and has laundered trillions of dollars more than bitcoin. This isn't about money laundering - it's about governments trying to exercise control over what they see as a threat to their easily manipulated fiat monetary system.
Money laundering can happen both with money that is outside of the banking system (cash) and is inside the banking system (in bank accounts). An example of someone laundering money that is in the banking system would be someone committing identity theft to take out fraudulent loans that are deposited into a bank account. Another example might be someone using a fake business to process transactions from stolen credit cards. Both examples would necessitate cash being withdrawn from bank accounts in order to ensure the fraudster can keep the illegitimate proceeds.