If the landlord receives rent from the tenant, it isn't any concern of the landlord how they get the money.
The tenant owes the rent - which is obviously the case, the landlord can't sue the local authorities or the DWP for the arrears.
The benefit fraud is a separate issue altogether and should be reported to the authorities if that's what the landlord thinks is the right thing to do (I do).
If the landlord is being paid benefits directly and the LA find out about the fraud, they will seek to recover the benefit paid from the landlord (which is a fun feature of renting to people on benefits).
When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).