Its not direct censorship but rather that censorship is a side effect of it. People will choose to self censor in fear of getting banned. Which is IMO not even the worst part of this system.
To me the worst part is its totality/finality. In most case if you are banned, you are banned forever, and from every server. All your progress, friends and sentimental value to your account will be lost.
That being said there will always false positives. And currently there exist mods for server that allow you to social engineer and "fake" parts of reports to a degree. If you have a admin/owner in position of power you better do not upset them or they may try to get your account, your progress, removed from all server in the game.