diff --git a/localstack/services/sns/publisher.py b/localstack/services/sns/publisher.py
index f12e02c102b92..57ba8d86f3c95 100644
--- a/localstack/services/sns/publisher.py
+++ b/localstack/services/sns/publisher.py
@@ -1251,55 +1251,56 @@ def _evaluate_numeric_condition(conditions, value):
         return True
 
     @staticmethod
-    def flatten_policy(nested_dict: dict):
+    def flatten_policy(nested_dict: dict) -> list[dict]:
         """
         Takes a dictionary as input and will output the dictionary on a single level.
         Input:
         `{"field1": {"field2": {"field3": "val1", "field4": "val2"}}}`
         Output:
-        `{
-            "field1.field2.field3": "val1",
-            "field1.field2.field4": "val2"
-        }`
+        `[
+            {
+                "field1.field2.field3": "val1",
+                "field1.field2.field4": "val2"
+            }
+        ]`
+        Input with $or will create multiple outputs:
+        `{"$or": [{"field1": "val1"}, {"field2": "val2"}], "field3": "val3"}`
+        Output:
+        `[
+            {"field1": "val1", "field3": "val3"},
+            {"field2": "val2", "field3": "val3"}
+        ]`
         :param nested_dict: a (nested) dictionary
         :return: a list of flattened dictionaries with no nested dict or list inside, flattened to a
         single level, one list item for every list item encountered
         """
-        flattened = []
 
-        def _traverse(_policy: dict, parent_key=None, current_rule=None):
-            if not current_rule:
-                current_rule = {}
-
-            if (or_val := _policy.get("$or")) and isinstance(or_val, list) and len(or_val) > 1:
-                pol = {k: v for k, v in _policy.items() if k != "$or"}
-                for value in or_val:
-                    p = {**value, **pol}
-                    _traverse(p, parent_key=parent_key, current_rule={**current_rule})
-
-            else:
-                for key, values in _policy.items():
-                    flattened_parent_key = key if not parent_key else f"{parent_key}.{key}"
-
-                    if not isinstance(values, dict):
-                        current_rule[flattened_parent_key] = values
+        def _traverse_policy(obj, array=None, parent_key=None) -> list:
+            if array is None:
+                array = [{}]
+
+            for key, values in obj.items():
+                if key == "$or" and isinstance(values, list) and len(values) > 1:
+                    # $or will create multiple new branches in the array.
+                    # Each current branch will traverse with each choice in $or
+                    array = [
+                        i for value in values for i in _traverse_policy(value, array, parent_key)
+                    ]
+                else:
+                    # We update the parent key do that {"key1": {"key2": ""}} becomes "key1.key2"
+                    _parent_key = f"{parent_key}.{key}" if parent_key else key
+                    if isinstance(values, dict):
+                        # If the current key has child dict -- key: "key1", child: {"key2": ["val1", val2"]}
+                        # We only update the parent_key and traverse its children with the current branches
+                        array = _traverse_policy(values, array, _parent_key)
                     else:
-                        _traverse(
-                            values,
-                            parent_key=flattened_parent_key,
-                            current_rule=current_rule,
-                        )
-
-            # this check is to validate we're properly at the end node, and that we can safely "commit" the rule before
-            # iterating out of the current branch
-            if current_rule and not (
-                any(isinstance(v, dict) for v in _policy.values()) or "$or" in _policy
-            ):
-                flattened.append({**current_rule})
+                        # If the current key has no child, this means we found the values to match -- child: ["val1", val2"]
+                        # we update the branches with the parent chain and the values -- {"key1.key2": ["val1, val2"]}
+                        array = [{**item, _parent_key: values} for item in array]
 
-        _traverse(nested_dict)
+            return array
 
-        return flattened
+        return _traverse_policy(nested_dict)
 
     @staticmethod
     def flatten_payload(nested_dict: dict) -> list[dict]: