Guest cancelled booking on check out date!

Guest cancelled their booking on the check out date and booking.com is only charging them the cancellation fee of one night. This guest stayed with us for two nights and was refunded the second night via booking.com virtual card. Booking.com sent a notice to the hotel that if the hotel does not refund the second night to the virtual card they will go ahead and process a chargeback. We reached out to booking.com customer care and they want me to reach out to the guest and ask the guest to pay the hotel directly. Why did booking.com allow the guest to cancel this booking after the check in time and why was the guest only charged a cancellation fee without booking.com confirming with the property first? #urgent #advice #partnercommunity