All perfect praise be to Allaah, the Lord of the worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His Slave and Messenger.
Enjoining good and forbidding evil is an Islamic obligation established in the Quran and Sunnah. You should not have overlooked her sin. You should have advised the woman if you were certain it would not have caused you any harm. We fear that not advising her while believing you would not be harmed might be considered cooperation in sin. Commenting on this verse (where Allaah Says what means): {And do not co-operate in sin and aggression.} [Quran 5:2], Ibn Hajar Al-Haytami said that overlooking a bad deed is considered collaboration on sinning. There are degrees of sins. If it is a minor sin, then not forbidding it, while being able to do so, is a minor sin. However, failing to forbid a major sin is considered a major sin. Scholars mention that if a person saw an animal damaging someone’s property, he must prevent it as long as he does not fear that he might be harmed.
You should have advised that woman in a kind manner to return what she had stolen. If she did not listen to you, you should have informed the responsible person, provided that you did not fear you might be harmed. If you feared that you might be harmed, you should have merely disapproved of what happened in your heart.