I used to be a bus driver on TfL services. The ticket machine on the driver's side flashes up with "Freedom Pass D" for disabled or "Freedom Pass E" for elderly and actually shows all other discounts loaded onto Oyster Cards. Every single driver on TfL services is required to carry pass withdrawal forms or else face a rather steep financial penalty if caught by an inspector without one. TfL are known for taking a hard line on Freedom Pass misuse and bus drivers can play a role in identifying potential misuse.
I did pay close attention to what the machine said when cards were validated and also looked every single boarding passenger in the eye as they got on. Freedom Passes are commonly withdrawn when it's evident that the holder was not entitled to use it, i.e they're not the person shown on the photograph. I only asked to see the photocard if it flashed up as Freedom Pass E and the holder looked nowhere near the age of eligibility, or if the machine displayed "Freedom Pass stopped." I was surprised that people who knew they were misusing the passes handed them over instead of turning around and making off.
Some drivers consider checking passenger's tickets or chasing payment for those who deliberately board without paying as a nuisance chore, whilst others take it seriously. Regardless, if they're prepared to let it go then it's unlikely they will get out of their cab and seek out the passenger if it's reported at the time. TfL (quite handsomely!) pay ticket inspectors to do the job and judging by the threads appearing on the
Consumer Action Group forum, they do catch quite a lot of people out. It is rare to see them - I used to drive through some of the most deprived parts of London where fare evasion was rife and received plenty of death threats for stopping evaders. In several months, I only ever had one inspector board my bus - and that was on the Kings Road/Sloane Square in Chelsea.
A report to TfL may result in direct action - after all, we saw on The Tube that their inspectors work with the CCTV operators to catch out fare evaders. However, as I say they do pay ticket inspectors and try to encourage drivers to be proactive so rest assured they are already on it!