Just a couple thoughts on how this could be implimented...
- From the "Friends & blocked users" tab in your account settings there would be a third section titled "Manage flagged users". Just like friending and foeing, you would just type in the account username that you want to flag and this flag is only visible to you and not other players.
- If you place someone on your "flagged list", they would still be able to send you trades/PMs as normal and you would still see their posts in the forums.
- When you receive a trade or PM from a person on your "flagged list" you will get a message/notification at the top of the trade page or message saying something like, "Caution: You have flagged this account"