This happened to me and my brother while in Mexico. Point 6 became:
*smile* *calm gesures* Oh, in the UK we have an on the spot fine for that, who do I pay? *look round like an idiot*
We got some shifty looks from the police, then two of them waved their guns at us (this was my first and last experience of guns) then emptied our wallets.
We went back to our appartment and got shit faced on tequila.
I can't remeber who gave me that stupid 'who do I pay the fine to' advice, but it worked like a charm. I owe them a beer.