Salem, the upcoming MMO from Paradox Interactive which is known for its Permadeath mechanic, has an interesting way of dealing with crime and punishment.
Salem is already known for its Permadeath mechanic where in-game characters that succumb to the harsh wilderness environment, or are mortally wounded by other players will die permanently. The crime and punishment system involves the creation of a scent of evil when players commit crimes against others in game. This enables players seeking retribution or revenge to take matters into their own hands to exact justice.
Björn Johannsen, of developers Seatribe, discusses the system in the following video -