The app might be able to detect the pattern generated by the fake data generator and refuse to work in that instance. E.g. apple's approximate location feature often puts you into the city center at a very specific location. It's trivial to detect devices that are always at that precise location and only move around in discrete steps between those points.

This can lead to an arms race where the OS creates increasingly advanced/realistic fake data, and apps get increasingly sophisticated logic.

So I'm not a fan of solving this the technical way. A policy is way better, but you need to be able to enforce it.