Honey West wrote:

So in Dec. of the year of the fire (we think), Red was coming home on leave to see his family. On leave from somewhere, but did they actually say the Navy? I can't remember. Katarina implied in Requiem that both sides would soon know about their affair. So was Red allowed to remain in the Navy after that supposedly came out? Was he ever investigated at the time? That's why I think he was being blackmailed into doing something covert. But I haven't figured out how that fits into the timeline of what we think we know. I need to go back and digest. I think I really need to make my own "wall of clues". LOL!

This is Raymond Reddington.  If he was a smooth operator back then as he is now, he could have said she was a source that he seduced to get info.  They may not have been concerned about that. Spies are given a lot of leeway to do what they want. Do we ever have any other evidence that the affair was uncovered by intelligence officers other than KR's word?   Kirk is the only person outside of the couple who talks about the affair because he had discovered it and had almost killed Red.  I don't recall people like Velov talking about it?  The Director appeared to know things (he apparently knew KR enough to tell Liz she looked like her mother and he said to Red that he knew who Red was to Liz).