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:
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.
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.
To add a parameter:
In FMOD Studio, you can test different Occlusion settings while connected to the Editor and without having to rebuild your Soundbanks. You need to save the project after making changes and reconnect to the CRYENGINE.