Smuggling is trading’s cousin; the mechanics of which are fairly basic.
When you go to a trade city instead of going to an exporter you go to a “dealer”
The dealer sells you crates that give you more xp and more money. But as soon as you buy them you get put on a list of smugglers (call it the bounties list, perhaps).
If someone see’s you on that list, they can go an shoot your ship down, which would give that the player the xp and money that you would of gained from turning in that mission. Along with destroying all the crates.
EDIT: Perhaps to mitigate those people that would try to do these trades in the middle of the night to escape the bounty hunters. The more illicit crates you buy the higher a bounty gets associated with you which sticks with you until you die.
So to sum it up. When you buy illegal crates, you are put on a list. If you get shot down, the person that shot you down gets the xp and money you would of earned from that mission. The more illegal missions you accept the higher your bounty gets which could also be collected if a player kills you.