“I am a mother of a three-year-old daughter. I am very concerned about my recent observation of a tendency for a child to look at and touch the genitals. He also observes his father with interest, when he does hise physiological needs.”
I think, that there is no cause for concern. The child simply began to notice differences in the structure of sexual organs and this should explain his interest in these matters. It can also be an expression of anxiety caused by a fact, that the girl noticed the differences, is afraid, that her genitals are somehow "worse". It can make her anxious. Using ill-considered arguments (e.g.. telling the child, that he is doing wrong and will no longer be loved by his parents) it only gives cause for new unrest. It would be more prudent to silence my pears, as soon as the first signs of them appear. My advice would be to just explain to the child (adjusting translations to his intellectual abilities), what are the differences between the sexes. This should fix the problem and reduce the child's interest in the topic.
However, if that had not helped and you would have admitted, that the child is excessively interested in sex, it affects the genitals too often (also in public), I would advise to go with my daughter to a child psychologist. Its task will be to discover the causes of the child's anxiety and fears. It happens, that masturbating is related to some other disorder in life (also in the sphere of the psyche) child.