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UPDATE: Apple released an update that resolves the issue below. To resolve this issue, update to macOS 12.3 or higher. If unable to update to 12.3, then the steps below will still allow the drive to be accessed.
When trying to unlock a locked drive on macOS 12 (Monterey) the following message may be displayed.
It is important to know that there is nothing wrong with the drive. This message occurs because of an issue opening the application “Unlock Drive for Mac” located on the drive. For these situations, please install Toolkit and use Toolkit to unlock your drive instead, and access your data.
Install Toolkit and a prompt should appear to unlock the drive when security is enabled.
If the prompt doesn’t appear automatically when you connect the drive:
If you experience issues unlocking using Toolkit, physically disconnect and reconnect the drive then try those steps again.