Praise be to Allah.
With regard to this man who has nieces – i.e., he is their paternal uncle – and the woman and the questioner say that he jokes with them in an obscene manner, it is not permissible for the nieces of such an uncle to come to him or to uncover their faces in front of him, because the scholars who say that it is permissible for a woman to uncover her face in front of a mahram allowed that on the condition that there be no fitnah. The fact that this man jokes with his brother’s daughters in an obscene manner means that there is the fear of fitnah from him. So they have to keep away from the causes of fitnah. It is not surprising that someone could feel desire for his mahrams, for we have heard of someone who committed zina with his sister through his father (i.e., his half-sister) because she was not his full sister – we seek refuge with Allaah. And we have heard worse than that, that there is someone who committed zina with his mother – we seek refuge with Allaah. Look at what the Qur’aan says, where Allaah says (interpretation of the meaning):
“And marry not women whom your fathers married, except what has already passed; indeed it was shameful and most hateful, and an evil way”[al-Nisa’ 4:22]
And Allaah says concerning zina (interpretation of the meaning):
“And come not near to unlawful sex [zina]. Verily, it is a Faahishah (i.e. anything that transgresses its limits: a great sin), and an evil way (that leads one to hell unless Allaah forgives him).”[al-Israa’ 17:32]
He does not only say faahishah (shameful, a great sin), He also says, maqt (most hateful). This indicates that having intercourse with a mahram relative or one’s father’s wife who is also a mahram are crimes which are worse than zina.
So to sum up the answer:
They must keep away from this uncle and not uncover their faces in front of him so long as they see that he is joking in this manner which makes them have doubts about him.