OK, changed name for this. Real dilemma.

Someone I know and helped for free (favour on behalf of someone, a friend of a client iyswim) to relaunch his business. Basically told me they were lazy and needed a kick, rang and told me that they got some kind of covid grant. However, they got it by saying their company was a going concern by producing an invoice to charge my company for a service. This is a fictious invoice and basically they've got the grant through fraudulent means. They rang me to tell me in case their council contacted me. I was a bit stunned they would do this and didn't really say anything. I don't know if they did this to anyone else or how much the loan was for or indeed the fictious invoice.

If they hadn't of rung me then I'd know nothing about this.

My head tells me to ring their council and inform them but my pragmatic bit says do nothing as it might affect my relationship with the client (his friend), and this is a very good connection.. The client is great and probably knows nothing. If I tell, it will be obvious it comes from me, I think.

I've distanced myself from them. Would really appreciate some advice. I'm really annoyed to have been put in this situation.