Strict regulation leads naïve people to think, "Everything is under control." That has two important effects. One, it makes them irresponsible – a belief that they don't have to concern themselves. That general attitude then permeates the society. Two, regulation always creates distortions in the market. It's like a lid on a pressure cooker. Everything looks under control until the whole thing blows up.
That's what lies at the root of the concept of "black swan" type unexpected events. The black swan lands when the amount of corruption necessary to evade laws becomes as onerous as the laws themselves.