They can't just totally do it, at least: then the last hop to the actual display would be decrypted, sort of ruining the whole point of HDCP. My understanding is more that a receiver is just a passthrough for the communication between the source and the display. Though I'm surely oversimplifying.
The receiver could always reencrypt (and usually does, IIUC; signaling this is the point of the "repeater bit" in the protocol). If it was just a dumb passthrough, then there wouldn't be much need to advertise HDCP compatibility in the first place.
My understanding is that HDMI switches/receivers do the handshakes themselves, specifically to avoid this problem.