1.) "Otherwise" means the citizens are law-abiding except when they confiscate drivers' keys which is illegal or not abiding by the law.
2.) A semicolon can sometimes be used as a "strong comma," to enhance the separation of other items in a different logical series. That is not often mentioned in grammar books, but people sometimes use it that way. Put another way, writers do not always adhere to strict grammatical conventions, but use the language and its orthography in a way that seems natural or suits them best.
3.) Both are acceptable, but it seems that "A, B, and C "is increasingly preferred.