That’s a problem with your bank, not with the regulation. They decided how to implement aml, and it sounds like they’ve done a bad job and can’t deal with internal organizational barriers.
"That's a problem with your house, not with the flooding. They decided how to build it and it sounds like they've done a bad job and didn't handle setting up flood barriers properly."
That... does seem like a good analogy for this situation!
OP is not likely to be able to change KYC/AML laws, nor is the homeowner likely to be able to prevent the region from flooding, but they might have some effect on the bank (or could choose another one) if others implement those laws in a more efficient or effective way, just as the homeowner could upgrade their house to handle the regional flooding more effectively, or choose another house that did.
This is a poor analogy. There isn’t a government mandate of floods and, if there were, one might reasonably choose to live in a home with strong flood protections.
Have you heard of "defensive SAR filings" by financial institutions? That's what is happening here. Banks are overly defensive: they would rather err by implementing onerous policies than getting fined hundreds of millions of dollars five years later.
Regulators are NOT providing any feedback whatsoever to already filed SAR filings, nor are they clarifying their AML policies.