The IRS encourages banks to check the names on direct deposits, but the bank is not required to do so. Many banks do not check. If your mother-in-law's refund was deposited in someone else's bank account, she should contact the bank, explain the error, and ask the bank if they will help her recover the money. If the bank won't help, your mother-in-law will have to consult a lawyer.
Neither the IRS nor the bank is at fault. They followed your mother-in-law's instructions and deposited her refund in the account that she designated on her tax return.
See the following page on the IRS web site, particularly the third bullet under Scenario and the fourth (last) bullet under Solution.
What should I do if I entered an incorrect routing or account number for direct deposit of my refund...
