Does this gives a free hand to scammers as they know that they cannot be punished by a court of law
Unfortunately, yes. There are no checks and balances in place anywhere, so while legitimate users' accounts are being shut down by exchanges who proceed to keep the money, there are also individual scammers (the high-tech thieves) who steal from people for a living, and nobody from the crypto platforms to the social media apps to the countries are doing anything to quash it.
I monitor the methods of fraud in my country. There are a lot of phone scams in which the scammer asks the victim to transfer money to another account. It can be a transfer of money to a drop account or a purchase of a cryptocurrency, but it is impossible to fight against this, because the money will be quickly cashed out. All banks have instructions on how not to become a victim of a scammer, but fools still believe phone scammers.
This also happens in other countries too and it is something that the government can not stop totally. This can be reduced if the government force the bank to always traced and prosecute people that are involved in this kind of scam.
Some many of these kind of scam are in different style and the scammers always look for ways to make sure that they trick or compelled the victim to quickly do what they want without suspecting if they are scammer or not.
Cryptocurrency has created an avenue for many of these scammers to manipulate the innocent ones and people that do not have good knowledge about the cryptocurrency and how we can become a victim of scam if we are not smart enough. I think we need to pass the information around to those that may not be aware of various crypto scam that could make them lose there funds.
In Russia, if the money has been withdrawn from a bank account, then it will be cashed out very quickly through drops. In Europe, there is a system of fast payments, up to 10,000 euros and another payment system, for amounts over 10,000 euros, where payments take longer and the bank checks these payments and requests additional confirmation from the bank client.
Even with all these confirmations, the bank is still ignorant of many ways those scammers are using to get funds from there victim. Scammers are always looking for new ways to thief and scammer people no matter the security and restrictions that is needed to cashout from there victim account. Sometimes the bank workers are connected to there scammers that are carrying out this illegal and dubious act. I have seen different circumstances where the scammers were arrested and it was discovered that there are I formants from the bank that are giving out customers Identities and info to the scammers.