Some customer tells their bank "this charge from Paypal is fraudulent" or "this charge from Paypal is for an item that was never delivered". The bank says to Paypal "prove this is a valid charge or we will take the money back." How does Paypal not have to do fraud investigations in that case?
Even if we accept that Paypal has no place in protecting people from fraud, it's hard to accept that paypal should not try to protect themselves from fraud.
Consider that criminal gangs are huge multi-million dollar businesses that run complex scams and money routing tricks that can confuse governments[1] it's not surprising that PayPal wants to try to protect itself.
Paypal integrates with existing (non-Paypal-run) bank accounts, debit cards, credit cards, and more, and they have to work within the requirements of the integrated financial products, and those products all have fraud-related rules/clauses/legal stuff I don't understand. Paypal has to minimize their liability toward all the other financial institutions they work with. I sincerely doubt Paypal would be able to work with all those other businesses if their stated policy was to just pretend fraud didn't exist.
Let people spend their money how they want, be it scam or not. The only monitoring Paypal should do is that accounts aren't getting hacked.