One thing I'd like to point out is that there are a lot of reports that get ignored. If we were to ban every player that was reported even for a small period of time, a lot of people would be getting banned for having done nothing wrong. I understand there are some circumstances where the crime may be obvious, but I disagree with the idea that we should assume people are guilty and force them to prove their innocence by preventing them from playing the game.
As for your point on the watchlist not being effective, there are a lot of people that get watch listed that never get reported again. They see the warning and they stop. If people are convicted one time and never get reported again, I don't see any reason to ban them immediately.