Examining someone face-to-face is vastly more expensive than giving them a written paper to do.
But I can imagine a teacher knows these type of sites, one or two google searches would reveal if the report is copied or not.
But you're explicitly allowing cheating because "it's more like the real world".
If you have to implement a Binary Sort, does your boss punish you for copying a working sample from StackOverflow? Then why should an examiner (under your system)?
And still, what if the student copied it? What's the harm to the teacher? None,. The student only hurts himself with it.
Having a 1st class degree in Computer Science will benefit the cheater more than the lack of knowledge of how to build a LALR table will damage his career.