SWIFT Transfer: I send my uncle €50 weekly via PayPal, he gives cash to my son, and takes a 5% cut plus PayPal fees. It’s cheaper than Western Union—could this be illegal?

Quite legal on your part. You're sending money via legal channels, so all AML, KYC, reporting etc. is being done on your transfer. Your Uncle too is quite legal when he pays out from the till (he will have to expense it some way). The commission he is charging is illegal (if you strictly look at the rules). This denotes that he is doing MSB services for a fees, and this could land him in trouble, as opposed to you.

But since the amount is small, I doubt you have much to worry about.