Here is how it should work: certain classes(lets say Smuggler and Agent) have this "pickpocket" ability which they can use on any playable character. If the ability fires successfully, they get a random piece of loot that is auto-generated by the game. To be clear, this is NOT taken from the other player's inventory, it is just a random loot roll.
HOWEVER(and here is the fun part), if the ability fails, then the smuggler or agent gets their PvP flag turned on for the person they were targeting, and the person they were targeting gets first attack if they choose to attack. If they do not want to attack, then they can just ignore it and go about their business.
Different suggestion to make it more of a risk vs. reward thing (you do not have any risk by turning PvP flag on):
Keep it as you suggested for the success.
For failure however, automatically police drones arrive to arrest you. The police drones are 10x lvl 55 champion guards who shoot first and forget to ask questions later. You take normal damage, if you die in the fight. The drones also apply a dot first, that also slows you, are immune to stun effects and can see through stealth lvl 20.