Sure. But they'd make similar amounts of money (possibly more) by selling non-counterfeit goods.

They want their market to be open to third parties, because otherwise those third parties are gonna launch competing platforms. Better if they stick with Amazon, and Amazon gets a cut of the sale. There are thousands and thousands of Chinese companies selling products on Amazon, and many of them are fantastic deals. If Amazon blocks them, they all move to AliExpress, and maybe that really takes off and bites into Amazon's market share.

But when you consider the sheer number of products offered on Amazon, it's hard for them to separate the good-but-cheap from the crap counterfeit bullshit. And as you say...they make money either way, so it's not the highest-priority problem to fix--though as I said in another comment, they are aware that if enough products are crap, people will lose faith in Amazon as a whole, so they've tried different techniques to block bullshit reviews in the past.

But if somebody else wants to put in the work to filter shitty knockoffs from the results page? Well, that's fine with them! They make money selling you the real deal products, too--likely more, because their cut of a more expensive original product is gonna be higher.