Which is like the dumbest thing I've ever heard of. Money launderers surely have noooooo idea what's happening when their accounts get mysteriously locked and every rep they speak to is suddenly a powerless idiot.
This is working on the assumption that the majority of these flags end up being false positives (hence, "suspicious" activity, not "illegal"). If the common cases can be sorted out by a 30-minute phone call and faxing over some missing documentation, that saves resources on the law-enforcement side trying to reconstruct the same facts from "outside".
Of course, as you said, the real criminals will presumably take both the "bank suddenly started acting weird" and "here's an actual notice of investigation" as similarly strong signals to cut and run.
In the UK, an individual can be prosecuted for “tipping off” someone about a SAR. I assume something similar exists in the US. This is why the banks respond with absolutely minimal communication.