1 - Why were the child murders even being covered up in the first place?
2 - How did Leo piece together that the murderer was an employee of that factory?
Both questions may have been answered, I had a hard time following the movie a bit in some places.
The murders were covered up because back then the MGB and any organization under Joseph Stalin basically instilled the idea that there was no murder in paradise. Basically anyone (civilian) claiming that any type of crime that happened back then was non-existent. So rape, abuse, murder, etc. were all ignored if the accusers were civilian. The ONLY accusers allowed were that of the MGB, who most times did these type of crimes themselves all while trying to accuse most innocent people of being spy's or committing crimes they never committed.
Leo ended up figuring out where the killer worked with the help of his newer boss who initially didn't want to help but trusted Leo and felt sympathetic towards Leo wanting to solve this case. He ended up getting information for Leo as to where a lot of the murders were occurring and the only thing in common was the train going through these locations. Together they ended up narrowing the killer's place of work to two locations then one.