I would prefer real flags too, we know all about who is from where, however various considerations come to mind - especially where a user's country of location might be some place which he cannot disclose due to the big brother government of that country.
Of course, we get fake Pakistani IDs from India and even vice versa who are total psychos and pretend to hate on their own country as if no one would figure it out. We do out these people, and just ban them. So the most blatant violations are taken care of, but where it may just be a matter of personal security we are giving them a pass for now.