AdSense can't keep tabs on the world. Just report it to them and they'll ban the website sooner or later.
Illegal file downloading or copyright infringment websites are against TOS, most of these sites never get their payment. I personally believe Google reviews each site before they get their first payment.
Is the site completely made up of illegal downloads, or is this just a random post? Is the download illegal/copyright suff? Anyhow, Google does not approve of publishers with this content, and right, they cannot check everysite that publishes, but I'm sure there are plenty of people that report sites every day, so, .. do your part?