What is the ruling on money borrowed from a person who acquires wealth through illicit means?

One must think well of Muslims, and it is not permissible to think ill of a neighbor merely based on hearsay. Rather, the borrowed money must be returned to her unless it is definitively proven that all of her earnings are unlawful, or that the specific borrowed money itself is unlawful. In that case, it is not permissible for her to own it; instead, she must spend it for the benefit of Muslims or return it to its owners if they are known.

As for the position of the one who borrowed from you, if you are certain that the money reached her through an unlawful means, then you must return it to its rightful owners if they are known and did not pay it as a price for fornication. Otherwise, it should be spent for the general welfare of Muslims, unless you fear harm by not returning it to her.