Initially, I encrypted the AMI using a different KMS key, and the AMI was shared across accounts as part of the EC2 builder setup.

Subsequently, when I implemented a multi-region setup within the same AWS account, I shared the AMI across regions by creating a new multi-region KMS key. However, the Auto Scaling Group (ASG) was unable to launch the EC2 instances, and I encountered the same error mentioned earlier. Referred AWS post here

To resolve this, I attached the service-linked role to the newly created KMS key, which successfully addressed the issue and enabled the ASG to launch the instances.