You have it backwards. They can't violate the rules now because it would be obvious. If encryption were allowed it would be impossible to know if a transmission is violating certain rules or not.

Like what? Plotting to kill somebody over the radio? Logically there must be rules about hogging spectrum or harassing people but I'm having a hard time imagining how encryption could stop someone from knowing if you're breaking another law.

Commercial usage of amateur bands is prohibited. How can you tell if communication is commercial if you can't understand what's being communicated?

AFAIK encryption doesn't hide you if you're broadcasting; you can be found with a directional antenna.

You can be located pretty trivially, encryption or not. Look up fox-hunting (radio version).