Here's what's happening exactly.
Scenario #1:
Geofilter enabled with Geolatency off - "Searching for a match" to "Connected" it connects to a server outside of the GeoFilter and then disconnects and the "Searching for a match" message appears again until you find a server within the highlighted area in Geofilter. Once the match is over you will receive a -200 SR in addition to the SR earned for winning the match. Basically player gets penalized because its not connecting to the server the game wants you to connect to.
Scenario #2:
Geofilter enabled with Geolatency on - Can connect and play normally without losing SR, however it picks servers outside the selected range, basically Geofilter is not working.