Casinos have enough evidence of user violations against their business' ToS but they have to be careful when collecting proofs before banning a user or refuse a banned user'a ban appeal. Asking for KYC is like an extra proof that casino wants to have before making their final decision, and I think it is a possible reason they ask KYC.

Users who violated ToS, did not know that they can not beat a casino after their cheating activities were detected and collected by the casino. Whatever thing they do next will not help them proving that they have never broken any rules there.

They can complain why a casino intended to ban my account but still want me doing KYC and eventually, it's a ban too. The casino has terms in ToS about KYC and they can ask KYC any time.