PEGI 16 is the rating assigned to FFXIV in the EU, but North American versions have it rated at T (13+), so people younger than 16 do play this game; not all countries share the same rating, and how ratings are determined can vary from region to region. In addition, online interactions are always harder to police than swearing added to the game's script and as such usually do not contribute to assigned ratings (in the US, at least, there's often an 'online interaction' warning that tells people that online interactions may not align with the game's rating, as you can't completely control people's actions).

Profanity and offensive language is specifically against the Terms of Service you agree to when playing the game, but much like the use of third-party parsers, in practice it often falls into a grey area of whether or not you'll be punished for it. GMs don't go digging through every chat log just to find instances of profanity so that they can punish people for it; that would be a huge waste of time and resources. The profanity filter exists for people who don't want to see it in their chat logs for any number of reasons, since SE can only punish you after the fact. Generally speaking, the only times you'll be punished for profanity will be when you are specifically cursing at someone, in which case the report will often be made not just because you swore but because you are actively harassing or verbally abusing someone. Otherwise, swearing won't usually be punished; I've occasionally used profanity by accident myself and never received punishment for it. If you were reported for using profanity, either you happened to encounter the extremely rare person who is so offended by profanity that they felt the need to report you over it (again, this is very unusual, so I'm always a little suspicious about these claims) or you were using profanity to verbally abuse someone, in which case the report was justified.