You can legally smoke at 16, you're just not allowed to buy it until you're 18. So it's the person who's buying it/selling it to her who's technically in the wrong.
It's likely to damage her health though, which of course is the key concern here.
I guess it depends on the relationship you have with her. If you're older and/or close to her, then just talk to her about it. If you're not close to her though then this may be tricky.
I advise against telling your parents about it, that's not the way siblings should roll imo...