Penalties involved in withholding knowledge of a rule violation
Player 1 would be committing a Tournament Error (Deck/Decklist Problem) under item 1 of section 3.9 of the IPG:


  The deck and/or decklist contain an illegal number
   of cards for the format.


If decklists are registered, it's also a violation of item 4:


  The contents of the presented deck and sideboard do not match the decklist registered.


The penalty for this is a game loss.

Player 2 would be Cheating under section 4.8, which a player commits if he or she "notices an offense committed in his or her (or a teammate's) match and does not call attention to it", if these two conditions are met:


  
  The player must be attempting to gain advantage from his or her action.
  The player must be aware that he or she is doing something illegal.
  


The penalty for this is disqualification.

Player 2 might also be committing a Game Play Error under section 2.6, which is defined like this:


  A player allows another player in the game to commit a Game Play Error involving an effect or action that he or she does not control, and has not pointed it out immediately.


Player 1 would have to be committing a Game Play Error for this to apply. Section 2.5, which defines Game Rule Violation, "handles violations of the Comprehensive Rules that are not covered by the other Game Play Errors". A Tournament Error is not a violation of the comprehensive rules, but the comprehensive rules do say this:


  100.2a In constructed play (a way of playing in which each player creates his or her own deck ahead of time), each deck must contain at least sixty cards
  Even if this means sections 2.5 and 2.6 apply, the penalties for both are less than the penalties for violations under sections 3.9 and 4.8. Also, the IPG suggests using the latter two in this case:
  
  If a judge believes a player is intentionally not pointing out 
  other players’ illegal actions, either for his or her own advantage, or in the hope of bringing it up at a more 
  strategically advantageous time, they should consider an Unsporting Conduct — Cheating infraction.