I'm sure the following is not a monopoly of Krakow, but just to share our experience.
Mid afternoon, broad daylight at the bottom of the Castle hill close to the Jewish Quarter. Approached by a well dressed, pleasant young man who verified we were tourists and asked for directions. A few seconds later, approached by a tough looking angry bloke who claimed to be a 'secret policeman' - flashed ID, and asked to see ours. 'Nice young man' complied, so did we - our ID in our wallets. Angry bloke then started sniffing all our wallets'for drugs' and started handling our money shouting 'do not change money in street'. I realised this was a really bizzare situation, grabbed Angry's arm and started shouting at him to let go. He handed back the few banknotes that he had palmed and walked away casually. 'Nice young man' made a big show of being shaken and made his escape, again casually. We felt absolute idiots for falling for this scam - the two were obviously in cahoots. It took us too long to get our heads around what had happened to call for assistance. There had been no threat of violence and Angry bloke obviously didn't want any aggro either - I'm quite a big guy. All's well that ends well, but be prepared. It seems the Jewish quarter is developing a reputation as the 'iffy' part of town.