Oh, good to know.
On the other hand it's also understandable. As a smuggler I would want to smuggle to damage the economy. Which means I would smuggle to enemy territory.
The weird thing, though - how do they know?
to be fair - a smuggler tends to smuggle to make money. i suspect there are few who do it to fulfill some vendetta. (IRL)
so on that note - a smuggler doesn't really care how is rep stands. i imagine one would prefer not to be shot at but that's about were the line starts and ends.
from a fiction standpoit, though - it doesn't make a ton of sense that your rep drops if they supposedly don't know you sold anything. faction influence dropping, sure...but if they know enough to like you less it stands to reason they should know enough to arrest you.
i guess you could spin the fiction so that it's more like probihition rumrunners...everybody knows who's doing it - but they just can't arrest you without backlash of some kind - legal or social.
whatever.
i kind of like it. it means only smugglers should smuggle. it's not a casual kind of activity
makes it a little more scary for players to break the law unless they've already chosen to be law breakers.