What should I do if I catch my younger sister touching herself? I'm too shy to bring it up, but I'm worried about the consequences.

I would suggest indirect advice through reminders but not in a direct way. Bit by bit increasing her iman separately from this subject for when her iman increases, she will leave these things. Also if she is old enough and needs marriage, look for a husband for her, so she can fulfill her needs. Lastly, one of the most effective ways is a person she loves and enjoys her time with brings her closer to Allah and she will leave it in sha'a Allah as well as other forbidden things. Clashing with her head on is not recommended.