Q. I was on the train and found a wallet that, based on the ID inside it, belongs to a non-Jew. After considering what I should do and consulting with a few rabbis, some of them recommended that I return it by giving it to a police officer. (I didn’t know how to track down the person based on his name alone.) So I went over to a police officer, made sure I was wearing my tzitzis out, and gave it to him. Did I comply with the mitzvah of Kiddush Hashem?

A. Shulchan Aruch (C.M. 266:1) rules that one is allowed to keep the lost item of an idolater and the one who returns it commits a sin, since he is strengthening the hands of sinners. (Other reasons are also mentioned by Poskim). However, if he does return it in order to sanctify Hashem’s name, by having them praise and trust the Jewish nation, it is a commendable and correct act.
Horav Shlomo Miller Shlit’a added that in locations where the law requires that a found article should be returned to its owner or be given to a lost and found service or to the police, there may be an additional obligation of dina d’malchuta or observing the law of the land, to return the lost item. (Remah C.M. 259:7 and 356:7, Shach 356:10).
In our days the prevalent and constant security surveillance present, especially in areas of public transportation, may be an added factor in returning lost objects, to avoid a chilul Hashem.

Rabbi A. Bartfeld as revised by Horav Shlomo Miller Shlit’a