Korea was involved. According to the wiki it was based on a Chinese concept then carried into English after the Chinese practice used on American POWs during the Korean war.
Whitewash, as a simile, appears in the Bible.
URL: Matthew 23:27-28 NIV - “Woe to you, teachers of the law and - Bible Gateway
Note that that was the New International Version, which was published in 1978. The KJV doesn’t use the word.
Along the same lines, corporations that hypocritically pander to the elderly have been accused of “graywashing.”
True, but it does say “whited.” The term “whitewashing” apparently just predates the KJV, but many subsequent versions use the term.
So I think it is still plausible that the use in the Bible is the origin of the metaphorical usage.
The earliest use of sanewashing, spelled just like that, I am finding with google, is December 7, 2020:
Prior to that, it was spelled with a hyphen, as in sane-wash. I read somewhere that new English words often start out with a hyphen that is later dropped.
So what is the oldest use with the hyphen? I surely have have not found it, but here is Twitter example from November 2020:
It’s also in some other versions a bit earlier than the NIV - for example the RSV (c1950).