Re: not obvious that the activity is extortion
Post: "It also is not obvious that the activity is extortion or involves money laundering or identity theft."
Definition: "Most states define extortion as the gaining of property or money by almost any kind of force, or threat of 1) violence, 2) property damage, 3) harm to reputation, or 4) unfavorable government action. ... If any method of interstate commerce is used in the extortion, it can be a federal crime." [source1]
In practice: We've put up information that you don't want out there. In many cases (see article) it's actually wrong information, but you can bet we're not putting that fact up. If you want this removed, or, we must reiterate, your true innocence vindicated, you'll just have to pay us, won't you? It'd be a shame if you got denied that job just because the police mistook you for someone else and released you after an hour.
Definition: "Money Laundering. The process of taking the proceeds of criminal activity and making them appear legal. Laundering allows criminals to transform illegally obtained gain into seemingly legitimate funds." [source2]
In practice: If the state is correct that this activity is extortion, then by definition the proceeds thereof were obtained illegally. Using those funds to purchase items is therefore money laundering. This relies on the state being correct about the activity being criminal. I cover this above.
Definition: "Congress passed the Identity Theft and Assumption Deterrence Act. This legislation created a new offense of identity theft, which prohibits "knowingly transfer[ring] or us[ing], without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, any unlawful activity that constitutes a violation of Federal law, or that constitutes a felony under any applicable State or local law." 18 U.S.C. § 1028(a)(7)."
In practice: Perhaps this will hinge on whether the pictures of people collected through police procedure are "means of identification of another person". However, current law does hold that, in general, pictures of people does count as identifying. Assuming this holds for mugshots, they were used by these people in order to commit a crime, extortion.
I have no doubt that this does count as extortion. Money laundering can be argued depending on what they did with the money, but they're almost certainly guilty if the facts are correctly stated. Identity theft is more a legal issue. They can figure out the mugshots detail if they want.