I felt that if I hadn’t reported him, I would be validating it. If he didn’t want to risk people reporting him, he shouldn’t insist on cash. Let him take up the ethical violations with the IRS.
My point was not about whether you made the right call or not, but that the law itself is a problem if the point of it is to be loosely enforced. Individual enforcement actions aren’t really relevant in the big picture when the law itself is the primary problem.