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This is funny, but I feel like it's one of those times when profanity doesn't improve the joke. I think it's funnier without the "fucking".
Then Santa just sounds disappointed, and a disappointed Santa dressed as a dominatrix is funnier than an angry Santa dressed as a dominatrix.
The profanity enhances the joke. The subtext is Santa had doubts about that guy and no matter what was tried, that man was escaping Santa's surveillance. The only thing left was a sting operation. The man had to admit it, to prove beyond a reasonable doubt he was not nice.
Clearly elves weren't going to work as their talents ended at world class toy engineering. Three elves in a trenchcoat might work for tickets to the cinema but lingerie required full body exposure. Santa didn't ask his wife so he must not mix his work and home life. Good for him.
The only option was for Santa to find a way to fit into lingerie. Whether with magic or weight loss, he would make it work and we can only infer that effort was put into it. Hell, the mask was enough to fool the man into this situation AND could fit a full beard and hat underneath.
Santa put almost as much effort into finding out if this man was naughty as he would put into Christmas. All that effort to confirm what Santa suspected all along. That guy was fucking naughty.
I still disagree.
The humor comes from absurdity, and the most absurd thing about this situation is the contrast between Santa Claus and a dominatrix. Making Santa more Santa-like enhances that absurdity. Santa's defining trait is wholesomeness, so undermining that wholesomeness undermines the absurdity.
At best you could say that the absurdity comes from the contrast between Santa's wholesomeness and this over-the-top super-spy version of Santa, which I think is what the backstory you added is trying to convey. That's just the same joke with extra steps, with the punchline partially moved off-screen. It dilutes it.
A clean version would be both punchier and more accessible.