A returned item still has the OCLC status of RECEIVED - OVERDUE. When trying to complete the request manually, you get an error message saying, "Error updating the OCLC Item Request (Exception of the type 'AtlasSystems.Oclc.ResourceSharing.ValidationException' was thrown.)"
Contact the borrowing institution. They will need to process the requested item until it has reached the OCLC status of RETURNED. After that, the request can be finished.
If for some reason you are unable to contact them, go to the OCLC Request tab at the top of the request's ribbon. Hit "Recall" and check the item in. If you do not have that button, or if the item can't be checked in, you will still need to contact the institution.