This tutorial explains how to make use of Occlusion setting in FMOD Studio. There are two ways of setting up occlusion to work with CRYENGINE:
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Setting up Occlusion using a Lowpass Effect
The first and simple way is to add a FMOD Lowpass Simple or FMOD Lowpass effect to the Master Track. Make sure to set the Cutoff frequency to the maximum of 22 kHz.
Setting up Occlusion using a Parameter
Another way is to use a Parameter, even though it takes more time to set up but allows more control over how the sound changes when it gets occluded.