Isn't that backwards? Believing that someone is inherently bad is effectively equal to them having no free will and their fate being determined. You can swap out "born with an evil soul" for "genetic predisposition and early environmental factors".
If you really did replace the judicial system with one based on the view that free will does not exist, would the solution to habitual criminals be to simply separate them from the rest of society for life since they have no ability to determine their own actions? If instead you think they can be externally influenced by rehabilitation then how is this different from having a compassionate view of criminal behaviour that could include free will? Having free will doesn't mean that a person will always make the correct choice or even the moral choice, we're limited and imperfect after all.