Since she shared it with you, she's invited you to walk through a door that she's opened. Take advantage of that and TALK to her. Boy, aunts have such a special place, more power than you realize. You have the authority and respect of a mother with the open communication of a sister. I call them "sister-mamas". Use it. Instead of just telling her what YOU think, ask her what SHE thinks, and then direct her to make decisions that will work for her long term. This will let you know what's in her head and empower her to act on what she believes. Otherwise, you just want her to pay lip-service to what YOU think is right. If she doesn't find her own voice, then she'll spend a lot of time following. If you focus on telling her what you think she should do, then you'll just change whom she follows from him to you. Maybe. Either way, she's not being taught to be a leader and take responsibility for how she behaves in her relationships.
ETA: This is a personality and development thing, too. Something in your niece won't let her speak up to him. If she NEVER exercises this particular muscle, she will forever be at the mercy of some guy who says he loves her. She'll lose sight of any possibility of behaving differently because it will stop occurring to her that she has a choice. If that voice in her head keeps going unanswered, un-explored, never taken seriously...it'll stop speaking up. That part of her that feels like her opinions and comforts, etc. matter will die, and she'll be fighting this battle for the rest of her life.
When I was 14, I had an awesome same-age boyfriend. (We were very close friends for two years before and are still very close at 40.) Our love was innocent and pure, and we were experimenting with the things that we saw other couples do all the time. We weren't having intercourse or fondling genitalia, just making out pretty hard. Anyway, I let him put a hickey on either side of my neck because neither of us had ever experienced that and wanted to check it out. My father didn't yell at me, but he let me know that he didn't like it. Besides the embarrassment, what I retained from that conversation was that this boy had no right to brand me. "You belong to me and your mama, and we haven't marked you up." He hadn't earned any rights to stake that kind of claim on me. Of course, I was in love and knew that no harm was meant, but I carried with me that lesson of earning rights/privileges. I learned not to let some guy just assume any rule in my life. Your niece is not too young to learn that. Every guy won't be like this, but there's a reason that this guy is still attracted to her. If you all don't make her less attractive to him, you'll be essentially placing a bull's eye on her back for other guys just like him, and that behavior gets even less cute with age.
ALSO (sorry this is so long): When my cousin (like my child) was in about 9th grade, he had a cuckoo girlfriend. The men in their family (father and three sons) commit whole-heartedly, even as children. He was a perfect gentleman, because that is how the men in my family were raised. Girls mostly loved it and felt special. This one girl used to act out when he would talk to another girl, etc. Whenever I was around them, I spoke very frankly. He and I were close, so he told me stuff when it was just the two of us. When she was around, I made a point of randomly mentioning that they were too young to be keeping a certain level of tabs on each other, that it was unhealthy and blah, blah, blah...that neither of them should allow possessiveness between them.... She knew (without knowing just what he had shared with me) that he had the support of his family when he refused to "fall in line" with her. When she was looking to have sex with him (lining right up with the pathology that was in her home), she knew that we weren't going for it and encouraged healthy relationships. Before long, she got away from him because she learned that he was not going to bear the responsibility of rescuing her from her mother's house. It's okay for you to step in and show this guy that your niece has back-up.