True.  However, when it is time to convert from bitcoin back to fiat, problems will once again arise. It's at that point where the person cashing the coin would need to show the legitimacy of their income. If suddenly I were cashing out +10K USD, then alarms would be triggered and I would have to show where that income came from when asked.

yeah its the point of entry and exit from bitcoin that would be the problem for money launders.

Of course it's not possible. It's easier to launder money with cash than it is with Bitcoin. With Bitcoin every single transaction is tracked and logged and stored forever. That's not the case with cash.

Money laundering is possible with any currency, electronic or fiat. A public ledger can even be useful for money laundering. It's a perfect proof that a transaction was real. What's not in the ledger though, is the proof that some service was done, or that some goods were exchanged. The blockchain is a great tool for creative accounting...

Gosh, I could sell methods to launder money with BTC!

Even if bitcoin isn't completely anonymous it stills gives you a certain maneuberability that enables you to launder money. But there are a lot of ways to do that without it as well.

You have to get your money in and out somehow. Those are the places where AML/KYC regulation takes place. Not only that but the trail can be tracked back the entire way.

That's easy: Buy bitcoin in cash. Sell bitcoin for cash. From people who probably won't keep a record of the transaction. (You could always use a straw man; that's how the real "bad" guys do it.)

I just buy from exchanges using unverified accounts. Much easier that way. After that, it bounces a few times to a bunch of different addresses, then it just stops moving (at that point, it has already been traded to something else, or mixed or whatever).

Cashing out, well, I've never had to exchange more than a thousand coins, so I don't know how easy or hard it is to do larger amounts if needed.

It is possible underground sites is using bitcoin in every transaction they are doing. There are mixers so theres no worry.

Nothing, but what is stopping your bank to declare bankrupt??