I think I would imagine myself talking to the mother of the next boy or girl those two take on, because without steps being taken, there will be another, and the behavior will probably escalate. You can’t say…
“How was I to know they were capable of that?”
“What was I to do?”
If you do nothing, they will re-offend. It could happen tomorrow. It could be happening now.
Your actions won’t just be for the good of children who won’t become their victims. It will be for the good of your son, who knows that he does not need to accept outrageous behavior from anyone, and for the good of your brother and sister-in-law, who will want to know what they’re dealing with (and if necessary, be forced to deal with it), and for the good of their children, who must not have any excuse in adulthood for the bankruptcy of their characters… at least not where you’re concerned.
Again, I wouldn’t file charges unless your brother and sister-in-law fail to take strong and appropriate action, and promptly. But if they don’t… do not hesitate and do not delay. This is a moral and ethical issue that involves more than just your family.
By the way, to the naysayers: my older brother terrorized me all the time we were growing up. Beat me up, called me names, put down whatever I did. If he had done anything remotely like what has been described here, I would call that one of the most traumatizing things that ever happened to me, because of the physical restraint, the cruelty and humiliation intended, the assault on my sexual identity, and the age of the witnesses. It would make all the difference in the world if my parents stood up for me and made it clear that my tormentor alone was to blame for what happened to me.
If you have a child or children who act out like that, never leave them alone with other children.