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Short version: Tell the editor what's going on.
*) If you think you can still give a fair review, upholding
the best interests of the journal and its readers, say so.
*) If not, say so.
*) The editor might want to take you off the job anyway,
just to avoid the /appearance/ of conflict of interest.
It's an unusual case, involving two mistakes:
-- Sending the manuscript to the same institution is not
the usual practice; even an anonymous reviewer might be
tempted to give his buddies a boost.
-- The breakdown of anonymity amplifies the downside potential.