diff --git a/apps/api/src/utils/geohash.test.ts b/apps/api/src/utils/geohash.test.ts
index b41b60db..fb2426f0 100644
--- a/apps/api/src/utils/geohash.test.ts
+++ b/apps/api/src/utils/geohash.test.ts
@@ -1,5 +1,12 @@
 import { describe, expect, it } from "vitest";
-import { encodeGeohash, decodeGeohash, cellFor, haversineKm } from "./geohash.js";
+import {
+  encodeGeohash,
+  decodeGeohash,
+  cellFor,
+  haversineKm,
+  isPointInPolygon,
+  evaluateGeofenceCompliance,
+} from "./geohash.js";
 
 describe("geohash", () => {
   it("encodes known reference points correctly", () => {
@@ -42,4 +49,42 @@ describe("geohash", () => {
     expect(km).toBeGreaterThan(500);
     expect(km).toBeLessThan(560);
   });
+
+  describe("geofence compliance engine (issue #465)", () => {
+    const testSanctionZone = {
+      id: "zone-1",
+      name: "Restricted Airport Hub",
+      category: "restricted" as const,
+      polygon: [
+        { lat: 10.0, lon: 10.0 },
+        { lat: 10.0, lon: 20.0 },
+        { lat: 20.0, lon: 20.0 },
+        { lat: 20.0, lon: 10.0 },
+      ],
+      isBlacklisted: true,
+    };
+
+    it("correctly identifies point inside polygon", () => {
+      expect(isPointInPolygon({ lat: 15.0, lon: 15.0 }, testSanctionZone.polygon)).toBe(true);
+    });
+
+    it("correctly identifies point outside polygon", () => {
+      expect(isPointInPolygon({ lat: 25.0, lon: 25.0 }, testSanctionZone.polygon)).toBe(false);
+      expect(isPointInPolygon({ lat: 5.0, lon: 5.0 }, testSanctionZone.polygon)).toBe(false);
+    });
+
+    it("blocks transactions inside blacklisted zones", () => {
+      const result = evaluateGeofenceCompliance({ lat: 15.0, lon: 15.0 }, [testSanctionZone]);
+      expect(result.allowed).toBe(false);
+      expect(result.matchedZone?.id).toBe("zone-1");
+      expect(result.reason).toContain("Restricted Airport Hub");
+    });
+
+    it("allows transactions outside blacklisted zones", () => {
+      const result = evaluateGeofenceCompliance({ lat: 5.0, lon: 5.0 }, [testSanctionZone]);
+      expect(result.allowed).toBe(true);
+      expect(result.matchedZone).toBeUndefined();
+    });
+  });
 });
+
diff --git a/apps/api/src/utils/geohash.ts b/apps/api/src/utils/geohash.ts
index 690d7127..9c6e2a87 100644
--- a/apps/api/src/utils/geohash.ts
+++ b/apps/api/src/utils/geohash.ts
@@ -143,3 +143,66 @@ export function haversineKm(lat1: number, lon1: number, lat2: number, lon2: numb
     Math.cos((lat1 * Math.PI) / 180) * Math.cos((lat2 * Math.PI) / 180) * Math.sin(dLon / 2) ** 2;
   return R * 2 * Math.atan2(Math.sqrt(a), Math.sqrt(1 - a));
 }
+
+export interface Point {
+  lat: number;
+  lon: number;
+}
+
+export interface GeoFenceZone {
+  id: string;
+  name: string;
+  category: "sanctioned" | "high_risk" | "restricted" | "airport";
+  polygon: Point[];
+  isBlacklisted: boolean;
+  maxCashLimit?: number;
+}
+
+/**
+ * Checks if a coordinate point lies inside a polygonal geofence zone using ray-casting.
+ */
+export function isPointInPolygon(point: Point, polygon: Point[]): boolean {
+  if (polygon.length < 3) return false;
+  let inside = false;
+  const x = point.lon;
+  const y = point.lat;
+
+  for (let i = 0, j = polygon.length - 1; i < polygon.length; j = i++) {
+    const xi = polygon[i].lon;
+    const yi = polygon[i].lat;
+    const xj = polygon[j].lon;
+    const yj = polygon[j].lat;
+
+    const intersect =
+      yi > y !== yj > y && x < ((xj - xi) * (y - yi)) / (yj - yi) + xi;
+    if (intersect) inside = !inside;
+  }
+
+  return inside;
+}
+
+/**
+ * Evaluates whether a coordinate falls within any blacklisted or restricted geofence zones.
+ */
+export function evaluateGeofenceCompliance(
+  coord: Point,
+  zones: GeoFenceZone[]
+): {
+  allowed: boolean;
+  matchedZone?: GeoFenceZone;
+  reason?: string;
+} {
+  for (const zone of zones) {
+    if (isPointInPolygon(coord, zone.polygon)) {
+      if (zone.isBlacklisted) {
+        return {
+          allowed: false,
+          matchedZone: zone,
+          reason: `Location is inside blacklisted zone: ${zone.name} (${zone.category})`,
+        };
+      }
+    }
+  }
+  return { allowed: true };
+}
+