Our Crew has a wanted level of 1. After a Score they rolled Interrogation for the entanglement. The player just paid off the Bluecoats and that was that. After the session I realized the crew has a wanted level and the bluecoats could have done something about it during the interrogation. It seems to me that turning an interrogation entanglement into an arrest is too harsh but they do have a wanted level.
How would other people interpret this situation?
The bluecoats are crooked. They are the biggest gang and fortunate for them - a legal one. Therefore majority of them can be bribed, they are not prime example of honest policeman and most of the time they prefer not to deal with the scum on the streets unless something really big happened and some noble/inspector/force they can’t ignore is sending them. They would leave the natural selection to its works and act when they are sure they can crush the opposition. Some can even do it for fun or to extort you for coins.
So yes, they can be bribed even after the most insidious of crimes.
On the system side I wouldn’t turn interrogation into arrest. The arrest implies there is now case from the inspectors, the time for doubt is over and the Bluecoats send a gang equal to your tier to get you all. Quite harsh. Paying out is very costly. Interrogation is against single PC.
Also, just because they have wanted level, it does not mean that they should be arrested or interrogated every time. There are two parameters that come into play here - wanted level and current heat.
The wanted level determines the dice you roll for entanglement and the current heat determines what kind of entanglement occurs. High heat leads to bad and costly entanglements. High wanted level leads to more dice and change to roll high 
Yeah, I definitely felt the player should just deal with the Entanglement they rolled “interrogation”. Changing it to “arrested” would seem like a escalation on my part that would take it away from the actual roll they made.
However, Wanted level is more than just die roll mechanics, right? The rule book says:
“The higher your wanted level, the more serious the response when law enforcement takes action against you (they’ll send a force of higher quality and scale).”
I read that as the door is open for fictional concequences from having a wanted level. In this specific example I didn’t want to escalate but it is something that is possible in some situations I believe. I think it would just have to be the GMs call (or discussed at the table).
Yes, the higher the wanted level is, the more dice you roll and the more chance to roll high and get the entanglement related to die result of 6 for the high-heat columns. Entanglements are harsh and having two type at the same downtime is serious. So there is relation between wanted level, heat level and severity of entanglement you get. Also, since chance is involved, there is always a possibility to be lucky and get away with something minor.
The paragraph you quite is example for that - Arrest brings a band of bluecoats to kick your crew’s ass. Interrogation is just single PC that gets beaten.
If you are having your own entanglements and house rules - this is also fine and completely different story