Dual citizenship is ordinary in the United States. Your niece would have to formally renounce her U.S. citizenship to lose it. Some people do that for tax purposes or other practical purposes. She didn't even need a U.S. passport to claim citizenship status. Her U.S. birth certificate is pretty much the beginning and end of the story as far as her citizenship goes. Born in the United States equals "presumptively a U.S. citizen."

That presumption could have been overturned if her parents had been here on U.K. diplomatic passports, but that's pretty much the only exception.

Interestingly enough going to your question, I read a story not too long ago in the New York Times about E.U. and U.K. citizens who were dual U.S. citizens by accident of birth but who had few or no ties to the United States, in some cases not even realizing they had U.S. citizenship.

The story was about how they ended up having serious banking problems because certain financial institutions stopped doing business with them because they weren't following U.S. financial disclosure laws mandatory for U.S. citizens. (All U.S. citizens have to pay federal income tax, regardless of where they earn their income.)

If this should ever become a serious problem for your neice, she may wish to go to the nearest U.S. consulate or embassy and renounce her U.S. citizenship.