Guards do not stop a suspect for simply carrying stolen items, but the contraband is confiscated when caught. Paying Bounty to a guard or dying at the guard’s hands not only costs the price on your head, but also any stolen items in your possession. Have the items fenced or laundered to avoid losing them.
It is possible to equip stolen items, but they’re confiscated when you’re accosted by a guard. Stolen consumables are usable just like their legitimate counterparts. Be sure to use them before they’re confiscated, though. Stolen materials can be used as usual, though they do not stack with the normal resources and they are not added to the Craft Bag. Stolen items cannot be deposited at a bank. It’s a good idea to have any items you wish to keep laundered.