Access to a reliable payments network (of which there are very few in the world, and even fewer in the western world) is required for doing any kind of online business. Whether or not to destroy a business based on their -- alleged! -- illegal activity should be decided by a court, not a corporate legal department.
Unfortunately, there are garbage laws around financial transactions that make MC liable if they don't do their own policing. IMO those laws need to go.
This is true. But the standards applied to financial transactions are way more stringent than other businesses. KYC/AML laws basically create an affirmative obligation for financial institutions to proactively determine whether each and every customer is engaged in illegal activity.
Unlike in other businesses, it's not enough to just say that you weren't aware of your customers intentions. Unless you've taken efforts to affirm that all their activity is legal, you can be criminally liable.
If some guy walks into a bakers and asks, "What's the best cannoli to bring alone to a mob hit", then the baker is obligated not to do business with him. But the equivalent of KYC/AML would require the baker to verify and document that none of the pastries are being used for illegal activity.
That said, the issue here is a "fishing expedition". I'm sure Pornhub makes some effort to screen content for illegality but the problem is some still gets through 'cause of scale and costs. I don't know if Pornhub has safe harbor protections or not but I suspect the main target is effectively porn in general.