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Police stations reduce the effect the crimelord has on the population, ie the crime overlay. No red no problem!
Its best to deal with the time lords, ehrrr I mean crime lords asap if you have a prosperous island that you want to make perfect. If your island is struggling or you have high unrest leave them be. Also, put a police station anywhere that you have developed that is in the red or huge yellow patches while making sure you have YOUR desired liberty level under watch.
less crime = less effect from crime lords
2. Bet you didnt know your neighbor just robbed a bank did you? Bet youd cry foul if he was deported for crimes he committed in another country that you dont know about huh. Tropicans dont know ♥♥♥♥ guys. Would you see actions by the government against criminals that everyone thinks are normal guys as actions against criminals or the goverment doing whatever the hell it wants?
2) If I had a neighbor who was a Crime Lord I'm pretty sure I would know. If my neighbor was a small timer I might not know until the police came but the real question is would the arrest of a person, crime lord or not cause an increase in the civil unrest of an entire city or country? Probably not ....unless the person was very high profile to start with.
The point is, no one knows what other people are doing secretly. You dont know who are crimelords or rebels at first the police have to investigate. If the police require months of investigation to sniff out rebels and criminals theres no way in hell that Juanito would know and Juanito would be concerned when Mr Moreno is shot dead in the streets.
And while I am at it, they increase corruption. That shouldn't happen unless they are paying off someone in a position of power/have a hand in politics making them untouchable without an executive order.