Nocturnus wasn't a place one would say was beyond the Union's reach; in fact, they were well aware of its existence. How could a massive underground city remain a mystery when it was directly under their noses?
But if it was, one could only wonder how the Reaper Guild was able to smuggle illegal items into the city if they were aware of its activities.
The explanation lay in the fact the Union chose to turn a blind eye to Nocturnus, recognizing the benefits of having an illicit market that could be indirectly controlled.
Humans are simple, self-serving creatures; they would often go to whatever lengths to get whatever they wanted, and there was no telling what they would do if deprived of it for too long. Trying to completely stop them was an impossibility that has been proven through history time and time again.