I also came across a nice comment accurately summarizing all of this the other day: "This sounds something like a bank being like 'oh sorry, we can't take this $20 bill because it was used to buy drugs 5 years ago, so it's tainted...but wait, we're going to keep this $20 until you can explain how you got it.'"
It's worse than that. They take your money without saying what's wrong with it and ask you to submit all private information about yourself and the source(s) of the money. Then they tell you to wait while they investigate. During that time, you are blocked from accessing your funds but the "tainted" and "questionable" money that got you in trouble was already sent out to another client of theirs as "clean" money with no bad history to it.