Psyching is not illegal: psyching twice in the same way in a short space of time is not illegal.
So what is [or might be] illegal?
MI? "Psyches are rare." Well, my psyches these days are probably very rare. But that would not stop me psyching on consecutive boards if the boards and opponents suited. Nor does it mean a description of very rare is MI. So, unless we find this pair regularly psyches, there is no infraction.
What else? Fielding a psyche, ie a breach of Laws 40A3 and 40C1. The method of dealing with fielded psyches differs from jurisdiction to jurisdiction, which is one of the reason we ask OPs to state jurisdiction when asking questions.
Does the pass of 3NT suggest South is allowing for the 2NT not to be natural, ie is he allowing for his partner not to have his bid? Of course it does: he had game values opposite a natural 2NT bid and took no positive action. Definitely fielded.
In England/Wales this is a Red Psyche. Ave-/Ave+ and a further PP. In this case the South action is so egregious [see, I can use that word too!
] that the normal 10% is not enough, so 10% or equivalent is not enough. 9 imps to E/W whatever the result in the other room as a combination of Artificial Adjustment and PP.
In other jurisdictions you are meant to use Law 12C but the problem is that the 2NT bid is the illegal action, being a breach of Law 40C1, so you have to adjust according to Law 12B1, but without the infraction means the expectation after two passes. The only sensible way to deal with this is the English way, ie apply Law 12C1D.