Should wrong-doing be reported to authorities?

That is, if you know of or observe a crime being committed, or even a serious violation of rules and regulations, do you have any duty to recognize and report it (assuming that confronting the miscreant is unwise or impossible, or if s/he persists after confrontation)?

My own thought is “yes,” but the water is muddied by “loyalty”. For example, suppose the miscreant belongs to a group to which you belong. For many people, that ends the discussion: group loyalty is the highest morality for these, so reporting a fellow group member’s wrong-doing would mean being disloyal (to the group or to the fellow group member). The moral thing to do is either to ignore the misdeed or indeed to help cover it up.

We see this constantly: in the Catholic hierarchy, in police forces, in the military, in business: group members are constantly told that loyalty is the paramount virtue, and informing the authorities of misdeeds in the group is contemptible.

That’s why I don’t much value loyalty as a virtue: it seems to mean mostly to ignore or hide wrongdoing. Indeed, loyalty seems to become an issue only if the group or members of it are doing something wrong. If everything’s going fine, loyalty is no problem, but if you detect (say) someone in your department is taking kickbacks, are you “loyal” to him? or do you report the crime? What if he’s your uncle/cousin/brother/whatever? Does that require you to choose between becoming an accomplice or being “disloyal”? Indeed, for many a simple criticism of something the US is doing or has done is prima facie evidenceof “disloyalty”.

Why, exactly, is loyalty so important? Can someone explain to me what benefits it provides?

Right now I’m reading the Wikipedia article on loyalty.