I disagree. It means you need the next wandering encounter to fill out a questionnairre with questions like:
Are you a (a) sentient being who eats people, (b) a sentient being who doesn't eat people but murders them anyway, (c) not sentient at all, or (d) other?
When was the last time you killed innocents, and if so did you do it on purpose?
Have you ever had thoughts and actions that could best be described as "wicked"?
If you're demonic, do you consider yourself more (a) redeemable, or (b) irredeemable? (tick whichever applies most)
If you have family back at the lair or town, have you considered life insurance?
To take your statement at face value, everyone from street urchins to washerwomen can be attacked on sight under your regimen. If an orc warrior isn't automatically a black hat by default, then he'd better be good at filling out surveys. Or ensure every party has a paladin (bets that that ability is gone?)
Core PC orcs, drow and tieflings slide the game down this slippery slope further, arguably. I guess there's always the good old "they attacked first!" defence.