Is the value triggering the violation encoded more than two times? I've seen one or two bugs with this functionality in 9.4.x.
In general, I think ASM decodes the exact number of times configured. If there are still percent encoded values a violation is triggered. I don't think there is any significant performance hit if you set it for 3 decodings and the clients only send double encoded values. I'd expect ASM wouldn't decode the parameters if there wasn't anything to decode.
In our customer's policies, I always try to enable this check.
Aaron