If there is a fraud alert on the customer's credit report, that customer has already contacted law enforcement. That is a necessary step in order to get the alert placed in the credit report.
Your responsibility is to verify the customer's identity. How you do that is left to you. You must take steps to be sure that you are dealing with the real person, not the thief. That means following your verification procedures and probably relying on CIP files. However, if you discover, when you call the customer, that they did not file the application, it would be a nice thing (not required) to give the customer information about the fraudulent application so that the information can be added to the investigation.