I know how horrible a situation this is for you... about 5 years ago, I noticed my checking account was quite a bit lower than it should have been. When I checked the transaction history, I discovered a number of checks had cleared which I had not written. Long story short, turns out my sister had stolen one of my checkbooks and was writing checks on my account. Unfortunately, this was just one more step in a long process of selfish choices that my sister had been making for years. She also has a daughter, and our family spent ungodly sums of money bailing her out of trouble for the sake of my niece.
The problem is, bailing them out only encourages more of the same behavior.
I did end up filing a police report (had to in order to get my bank to return the money to me). Not much came of it, probably because when I first filed the report, I didn't have any proof that it was my sister. As a result, she suffered no consequences for her actions. Shortly afterwards, she stole money from a friend of our mother's while house-sitting. The lady also filed a police report... but she pushed. She took it to court, and my sister had to deal with some SERIOUS consequences. She had to pay the lady back, pay all court fees, pay a fine, and it went on her criminal record (but no jail time, I don't think your wife should have to worry about that).
The thing is, in the end it was a really great thing that she was caught and prosecuted. Experiencing suffering as a result of her actions made her realize how bad her choices had been. In the last few years she has completely changed; she's gone from someone that I can barely stand to be around, to someone I actually enjoy hanging out with and am proud to call family.
There's no guarantee that your MIL or SIL would have the same reaction, but you can certainly guarantee that if they get away with this they will only continue in this behavior. It's quite likely they would actually get worse
Try explaining it to your wife from this perspective... it might help.
And good luck!