As to how they will prevent students from using alchemy, a collar around their necks that blows up if the surge of alchemy is detected at any level? Thus effectively making cheating suicide. 

As to why? 

Most students of A.M.R.O by now would have a firm grasp over the essentials of alchemy (this is the final year after all). In this time the finer aspects are focused on.

Why no Alchemy?

When do we push our selves beyond what is humanly possible? In times of desperation, when we are backed against a wall and ingenuity is what matters. 

Alchemy is a bane, A.M.R.O knows that and it cannot allow its Asylums to revel in it. You must be able to control it, to pacify it and the only way to learn that is if you can prove to be able to live through an impossible scenario without the use of alchemy. For Asylums every day is survival, against alchemists and insanity. 

The objective is to teach them the most necessary ideology which is they are not alchemists. They must prove themselves better, rise to deny the impossible, rise above desolation and not be bent if alchemy is taken away. Else you are disposable. 

The rogues A.M.R.O will utilize in this area will be in the jungle, in essence there is no escape, not to mention these rogues won't be strong enough to pose a threat. They are merely pawns to achieve the process of building the perfect soldier. Also A.M.R.O is alchemy management and restraint. For them any practitioner of alchemy outside of Asylums are rogues, however they only silence the ones that are a nuisance. 

This is actually something that will come in the final year, as it is here one of the most important concept is drilled into your heads which is your own mortality, your dependence on alchemy and the other stuff I mentioned. 

Various skill level is irrelevant as everyone is in the same class, yes some are younger some older but they are all in the same class. Like I described this is not an ordinary system, younger folk can be bumped into a higher class (the only difference they won't graduate instead they will repeat or get higher combat training). There are also older people who joined late. As for the instructors, some of them will be sent to keep an eye on the students and guide them in certain areas. Albeit they won't interfere. If someone is going to die, they will die.