Unrelated but similar: I live in a rural area, so we don't get street delivery of mail. Instead, we need to apply for a PO Box. Every year, to verify that only residents are using the PO Boxes, the Post Office sends out a renewal form, and you have to show up with a current bill and your driver's license. The latter makes sense—the State, presumably, goes through the validation of your address, and you sign their forms under penalty of perjury, etc., the the former is hilarious.
So, to receive the very bill used to authenticate "current residency," the bill has to go through the Post Office (remember what I said about no street delivery? anything that's mailed to our street address goes... to our PO Box!), and then we show it to them to validate that we are receiving email to that address—which cannot be independently validated outside the driver's license.
The PO Box we're renewing is therefore used to validate itself. And the fun part is that if you delay in returning the form, they'll block off your box.
Now, I’m sure banks also love that for data mining purposes but it’s not entirely without a valid reason.
What mechanism causes KYC/ID checks to make banks unusable to organized crime? What purpose was organized crime using banks for? Is the government unable to get search warrants for bank accounts?
These are probably not what most people would consider valid reasons. The problems created outweigh the value of the solution.