The witness codenamed Person 31 told the Federal Court on Monday he was concerned by allegations he was hearing from the Victoria Cross recipient's own patrol members.
The elite soldier was told that one of Mr Roberts-Smith's squadmates had watched the decorated soldier kick an unarmed Afghan prisoner off a cliff in Darwan in 2012, he said.
More things "came to light" as he neared his departure from the force in 2014.
And he felt Mr Roberts-Smith and his troop members were let down by the system as an inquiry was not promptly held, allowing the men to move on.
Due to "weak leadership" the allegations were not investigated by the command, he said.
"And hence we're now dealing with this in court where nobody wants to be," Person 31 said.
Mr Roberts-Smith, 43, is suing The Age, The Sydney Morning Herald and The Canberra Times for defamation over reports claiming he committed war crimes and murders in Afghanistan between 2006 and 2012.
He denies all the allegations that the news outlets are defending as true.
Person 31 said he observed Mr Roberts-Smith during a pre-deployment training exercise near Perth with two young soldiers in a makeshift compound.
Later he heard another soldier dubbed Person Seven say words to the effect of "Oh for f*** sake", referring to Mr Roberts-Smith orchestrating a mock execution where one soldier pretended to shoot a fake prisoner.
Person Seven earlier testified that he watched the former SAS corporal order a subordinate to "f***en kill" the fake detainee, before the soldier looked confused and said "bang" pretending to shoot him.
"Are you good with that, because that's how it's going to be when we're over there," Mr Roberts-Smith allegedly told the trooper.
Person 31 on Monday said following the alleged training incident he walked past Mr Roberts-Smith outside their accommodation and stopped for a quick chat.
"Pull your head in, you can't be doing s*** like that," Person 31 said he told him.
"I recall him looking down, grunting, nodding and walking off."
The trial continues.
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