Touch ID on Magic Keyboard just does not work (MBP M3 Pro with Sonoma 14.7.1)

Just bought this Magic Keyboard with Touch ID for my work laptop which has M3 chip, from what I read, it should be compatible for Touch ID to work. However, it does not even work once.

I tried all the following already from what I found on the net

• restarting the laptop
• turn off / on the keyboard
• delete one of the touch ID finger and re-add one
• connect with the come with USB C cable and turn the keyboard off / on
• turn bluetooth off / on
• forget the keyboard in bluetooth and re-add

The same finger set up for touch ID works on the laptop touch ID, but not the one on the keyboard. Any other tips / tricks?