KYC isn't the best solution to fight money laundering, but it's add another barrier in order the criminal will be harder to escape and hide his identity. The only way the casino to fight money laundering is confiscate the funds and terminate the account without anyway to recover it, but most people will call the casino is scam.
I agree with your argument that confiscating funds and blocking accounts is the best way to fight money laundering.
But I have a question, how does the casino know that the funds are the result of money laundering?
Even though you said KYC is not the best solution to fight money laundering