The Latin text as edited by William Stubbs says:

"...tunc erant Angli vestibus ad medium genu expediti, crines tonsi, barbas rasi, armillis aureis brachia onerati, picturatis stigmatibus cutem insigniti; in cibis urgentes crapulam, in potibus irritantes vomicam." (Rolls Series edition, 1889, pg. 305)

The J.A. Giles translation from 1895 says:

"In fine, the English at that time wore short garments reaching to the mid-knee; they had their hair cropped; their beards shaven; their arms laden with golden bracelets; their skin adorned with punctured designs. They were accustomed to eat till they became surfeited, and to drink until they became sick." (pg. 35)

And the more recent translation in the Oxford Medieval Texts series by R.A.B. Mynors, et al. (1998) says:

“In brief, the English of those days wore garments half way to the knee, which left them unimpeded; hair short, chin shaven, arms loaded with gold bracelets, tattooed with coloured patterns, eating till they were sick and drinking till they spewed.” (pg. 459)

But what does William mean by "tunc" (at that time/in those days)? Apparently he means the English on the eve of the Battle of Hastings in 1066, and most other modern historians seem to take this at face value.

However, another editor of the Latin text, Thomas Duffy Hardy in 1840, thought that William must be referring to the ancient Britons encountered by Caesar and other Romans, who are also described this way. In the Gallic Wars, Caesar says they painted (or perhaps tattooed) themselves blue with woad.

William was the son of a Norman father and an English mother, but he clearly identified with the victorious Norman conquerors rather than his mother's native English. Maybe he wanted to depict the English as negatively as possible, as backwards barbarians, as a sort of justification for the Norman conquest.

So it's possible that William is just quoting ancient authors and showing off his knowledge of classical literature, rather than providing accurate ethnographic descriptions of people in his own time. That was extremely common for medieval authors (seems like I mention this here at least once a week, haha). He definitely knew Caesar's Gallic War and Civil War since he quotes from them more directly elsewhere in the Gesta Regum.

On the other hand, maybe William was telling the truth! He could be making a classical allusion to describe something that was still true in his day. The fun/maddening thing about history is, both options are possible...

In any case, the answer to your specific question is "picturatis stigmatibus cutem insignati." "Stigmata" could mean any mark, whether carved, or branded, or just superficial, but a Christian author like William certainly would have understood the word as referring to punctures in the skin, like Christ's stigmata (wounds from the nails and spear).

Sources, in addition to the Latin editions and English translations mentioned above:

R.M. Thompson, William of Malmesbury (Boydell, 1987)

Jeffrey Cohen, Hybridity, Identify, and Monstrosity in Medieval Britain (Palgrave Macmillan, 2006)

Elaine Treharne, Living Through Conquest: The Politics of Early English, 1020 to 1220 (Oxford University Press, 2012)