I consider this abuse. And in my opinion, this is a safety before etiquette issue. If you are witnessing abuse, you consider etiquette and manners AFTER the child's physical and emotional well-being. You stop it IMMEDIATELY by any means necessary, even if means physically removing the person's hands from the child.
This sort of "covert abuse" is just as harmful as physical as it makes a child question whether they have the right to have boundaries. I am a bit sensitive to the issue as this seemed to be a friend's parent's favorite form of humiliating her. When we were kids, Tori's dad got into the habit of tickling her in a typical "joking around" manner at first, but then Tori would stop laughing and ask him to stop, he would tease her about "not being able to take it" and keep tickling until asking would turn to Tori BEGGING him to stop, and he continued to tickle her until she cried. And then he would get mad and punish her for being a "drama queen" and a "baby" and tell her to grow up. He would punish her for being upset by something that he did. Tori's mom just told Tori that her dad wouldn't tease her so much if she didn't react to it.
It was SO painful to watch, because it made Tori a) not trust her dad b) wonder what SHE did to deserve her dad's treatment c) doubt whether she had the right to tell someone not to touch her. Her friends (myself included) telling him to stop did no good. He would tell us to stop being disrespectful. The only thing that stopped it was when we were around 9 and her dad started the tickling in the middle of her birthday party*, tickling her well past her asking him to stop after she'd had cake and ice cream and she threw up all over him like that scene in "I Love You, Man". (Whited out for grossness.)
And even then, he fussed at her for being a drama queen.
But he never tickled her again.
*Tori said he only did this in front of her friends. It was a passive aggressive, "I'm going to embarrass you and put you in your place" gesture. I think he wanted her to know that even if she was getting older, he was still in charge.