They usually are mutually exclusive, at least in the US and Canada. If an AML flag is triggered, or there is reasonable suspicion, they have to report it and are barred from telling you that you've been reported. Kick you out as a customer would be a great way to undermine the whole AML thing.

It is entirely possible that if he simply had transfers to or from known Bitcoin entities, that would have triggered it. Not because he did anything illegal -- Bitcoin isn't currently illegal in most places, and they have zero onus to report anything in that case -- but that the bank is hedging that there will be issues that come up in the future and they don't want the hassle. That they have determined that Bitcoin is going to be a regulation hassle in the future so they simply want to have nothing to do with it. This is in no way money laundering, or suspicion of it, and they needn't report anything -- just tell him to get lost so in a year or two when this becomes a big thing they have limited their exposure.