Honestly, this seems like a reasonable solution to me.
It brings back some utility to the KWS in a PvE bounty hunting context, as long as there are some nearby factions supporting the same superpower (which is usually true).
As for the "going to other systems" aspect of KWSing people ... I may be wrong, but I was under the impression that in the live game any local (i.e. non-superpower) bounty claims you acquire in a system can be claimed in that system, due to the presence of the faction in question. I don't remember encountering a scenario where that isn't true for a long time.
I do still question, though, whether it would
really be "too punishing" for players brought to justice for all their bounties at once. I think career criminals in this game tend to have significant cash on hand, and are usually aware of what their actions can entail. This, combined with the fact that the ship selling option makes it relatively difficult to have an "unresolvable" rebuy screen scenario after you've been playing for a while, makes me think that maybe it could still be an acceptable solution.
But, of course, FD are welcome to disagree and currently seem to! They certainly have more to go on than my anecdata, after all.
