The police are going to do nothing about this except, perhaps, file something that is forgotten. Often these scammers are not local and may not even be in this country.
I have seen stolen ads with watermarked pictures. Unfortunately watermarking may help but it's no guarantee when you've got applicants blinded by the unbelievably low cost of a rental and too dumb to check that it's legit.
I've had my own ads stolen and, at one point, had some woman call me crying because she sent some guy in New York a deposit of $750, showed up at my rental (in Georgia) and my tenants answered the door. All they could do is give her my phone number and she thought I could somehow get her money back. I suggested cancelling her deposit check but she had sent a money order. Ironically the woman lived locally and I asked her why she didn't want to see the rental first before sending a complete stranger these funds and she said she was so desperate for a rental that she just went ahead and forwarded the money. The local police could do nothing about this and told her so when she contacted them.
And that's what often happens. Desperate people looking for a rental. At one point my partner commented if they were dumb enough to believe this perhaps they deserve to get taken.
You can report the ad through Craigslist as a stolen ad but it can take several days (or longer) to remove and there is no guarantee it won't show up again a few days later.