Certain actions are considered illegal, and traders that get caught breaking the law will be asked to pay a fine.
Man in Black
Every once in a while a black-clad gentleman comes out of the Town Hall and strolls around the city square. This individual monitors the Tavern and reports any illegal activities to the local authorities.
The Man in Black appears 45-50 seconds after you enter a city and at regular intervals afterwards. While he is present, talking to a Pirate, Burglar or Weapons Dealer will result in prosectution.
While merely raising the Jolly Roger and sailing around the Hanse will not trouble the authorities, attacking a ship (or a town) carries a high risk of being reported.
Consenting to smuggle goods may result in prosecution, and carrying the action out is more likely to.
Heresy and Indecency
Traders who forget to pray in the Church or bathe in the Bath house will sometimes be reported for heresy or indecency.
You can pay fines at the Money Lender by clicking on the Repay Loan tab.