You're making assumptions that you can't back up with fact, based on what you assume to be standards across the entire industry.
Fact: False bans are extremely rare or nonexistant.
Fact: You do not get banned at the time of the offense, you get banned in waves.
Fact: Some people can cheat for weeks or months without being banned.
These are credible points you can use to support an argument or form a hypothesis. However, the reality of the situation is that without inside knowledge of how SE functions you cannot prove that hypothesis. Further, we know for a fact that an auto-banner was previously active that would trigger at time of action(you can search forum history).
Here's an example that is very hard to explain with your logic(from abyssea era, but nonetheless):
-Create 8 new accounts using 2 VPNs, 4 characters per IP.
-Create new characters, immediately home point warp to northern sandoria #1 and survival guide warp to Toraimarai Canal.
-Use ROV to PL the characters to 50. Did not see anyone the entire time.
-Log characters out.
-Characters all banned the next morning.
For a more recent example, there's a specific group of salvage bots on Asura that enter in a way that it breaks the entrance for everyone else while they are entering. I know of at least 4 different people who have been frequently reporting them(several times a week), and there are likely also incidental reports. Yet, after over 6 weeks of this, they are still there. Meanwhile, small servers that have far less population to report are saying their swarms are gone.
While you cannot say that all valid reports would lead to a ban in a report-driven system, there are numerous cases where characters who are not actively causing problems or played in visible areas end up banned with no evidence of reports. Further, the ban waves often contain a half dozen or more high profile players at a time. All you can really conclude is that bans are processed in waves.
Everyone who plays large scale amounts of accounts seems to agree that it is a matter of lottery, rather than a matter of reporting. It's a common experience to have characters banned out of a larger group of characters that all behave identically(and even share party/alliance in many cases). It is unlikely that reports just happen to all miss the same characters, or an investigation finds some but not the rest. This makes sense from a business standpoint; unlike many more modern games, FFXI cannot afford to have all known cheaters instantly removed. This isn't a delusion or exaggeration; enough of the game's playerbase uses tools that are considered cheating that instantly removing all of them would immediately require server merges and have notable impacts on the remaining population's social ties.
The culling is done in a controlled manner, so enough livestock remain to keep the game going. You can fairly argue that the pool to be culled from is generated via reports, but there isn't any evidence to back it up. We know they have an autobanning system. We know they have access to idle time. We know they don't ban everyone guilty. It's an equally valid premise that the autobanner is now serving as an autoflagger to generate that pool.