DOJ dropped it because the Treasury panicked and got into a massive fight with them. Treasury is responsible for AML laws and know full well how stupid they are - they became very scared that actually enforcing the laws Congress had passed to their full extent would trigger another financial crisis due to an exodus of trained staff. What DOJ wanted to do quite literally is jail CEOs in America for crimes committed by drug dealers in Mexico regardless of whether or not they knew anything about it. If they had succeeded, just imagine the impact that would have had on the finance industry. Under that standard, every single banker in the world would be a criminal facing jail time. Many of them would try to get out of banking as fast as possible, and banks couldn't easily survive massive simultaneous exits of senior staff.
You don't launder money to buy more illegal things, you launder money to buy things legally.
Edit - the easiest way to launder money is actually to run a legit business (like a restaurant), and create fake transactions that are settled in cash. And of course, business men will take that cash to the bank. Now how is the bank going to determine if that cash coming in is from a real business, a fake one, if it's drug money, etc...? Because plenty of real businesses, especially in places like Mexico, do most of their business in cash...