They don't know your exact location, but they would flag your account/device depending on your App Store localization and IP. I tested this, it doesn't work from outside of the US with a US IP, doesn't work outside of the US with the app downloaded on a phone set to US with a non-US IP, but instead requires a phone localized to download the app from outside the US, being outside the US, with an account that hasn't registered as in the US.

So no, it doesn't use your exact location, it just uses the censorship mechanisms that Apple and Google gracefully provide.