There is the function "Report to moderator". We need to make it more transparent. User should be able to:
1) view his reports
2) view the response of moderators
3) be able to refer to this problem in discussion (make link to the report and moderator's responses)
Reports could probably use some work, I don't know if I would actually use something like that for long though, checking reports is already a bit of a chore. Maybe a checkbox with approved/denied and a text box to add a short entry. It would have to be integrated into the report system somehow to make it as painless as possible.
Also the profile of user should be extended. Moderator decisions on user activity should be tracked in user profile and visible to all,
For example "user used offensive language in topik NNN1", "user violates rule KKK of subform in topic NNN2".
Kinda seems like a violation of privacy, I don't think that's anyone else's business. Main things I can see coming out of that would be more backseat moderating, more "just look at your history you're obviously a troll" type posts, and more drama in general.
It could be useful for mods/staff only though, to see repeat offenders.