Can anyone explain how AML rules, alerting, and FinCEN reporting would work under Ripple?
AML is only applied to customer relationships. In this case that would be people that have an account with a gateway and are using said account to either deposit or withdraw massive amounts of money/crypto from the gateway.
It cannot apply to rippled balances, as you don't need to provide any information to another entity in Ripple in order to extend a trust line to said entity. I.e. there is no customer relationship in that case.
All of the above is AFAIK and IANAL.