It's easier and more convenient to use fiat than you buy a coin then convert to fiat and now exchanges are mandating KYC for those who trade with a large volume of transactions every day or by means of fiat money. For P2P convenience, another big problem is that when converting to fiat money on the exchange, you have to KYC. In fact, using the internet nowadays is very easy to leave traces and locations I think criminals have the mindset that fiat money is more convenient than cryptocurrencies, which carries a higher risk for them.
With privacy coins and decentralized exchanges, KYC no longer becomes an issue. Criminals can remain out of the radar if they make use of decentralized and anonymous alternatives. The reason why most of them are using Fiat on top of crypto is because Fiat is stable. Not to mention, most merchants and businesses accept Fiat as payment method. Crypto's wild fluctuations in price tells us that it's more suitable as a speculative instrument than a real currency for day-to-day payments. I'd prefer criminals to stay away from crypto as much as possible so governments can give the "green light" for the industry's growth. The more legitimate uses crypto has, the better it'll be for its mainstream adoption. Just my thoughts
I believe one major reason also is how they are educated on how to use crypto. Most of them will prefer the traditional fiat method vs crypto, as I think, most of them don't know yet how to deal with crypto.