Ubi: Rambam Gezeila 11:3
Note also that Rambam refers to “reshaim olam”, so the issue seems to be not just avoda zara but maybe those who are hurting Jews or world in general? Not clear what would he say about Muslims.
Also, note as Avira said that S’A is not fully following Rambam here, but modern poskim seem to stress that possibility of Hillul Hashem or a chance for Kiddush Hashem really cover a lot of cases.
What is interesting in this case is that it is clearly not a mitzva of hiddur v. halakha – you can make a wrong decision both returning to an inappropriate person and not returning when appropriate.