Most Helpful Guy
If he's doing that to her now and she doesn't know, there's a very LOW likelihood he'll stop unless she knows.
Even if she knows and confronts him and beats the shit out of his ball (which he deserves, lol, you're right, it IS cheating), there's still a a likelihood he'll do it again.
Trust me, had it done to me more than once in my longest ever relationship. :)
If I were that friend, I'd want you to tell me. And if I were you, I'd tell her!
I also understand what a difficult position that puts you in. A way to make your position easier is to present her with EVIDENCE - simply telling her what you saw him doing may not convince her, and she may misdirect some rage at you :/ so be careful how you approach it :)