Server side cheat detection is not just about actually detecting active cheating on the server side. It's also about the server providing the client the absolute minimum amount of information needed to function/render.
Other techniques include simple statistical analysis: it's usually pretty damn obvious when a player is making inputs that shouldn't be humanly possible consistently, or reacting to information they shouldn't be able to see. That doesn't have to be done in realtime, it can be stored and reviewed later. (That might even be a feature on its own: delayed bans make it harder for cheaters to know if their techniques were detectable.)
Bans have typically been done in waves for a long time for exactly this reason, yes.
So if you're sending that data to the client, well now cheats can look for that and detect if there's a player behind you and warn you, giving an advantage.
The same thing applies to corners and other occlusions, just less extreme, but still just as frustrating.