Password-protected file downloads are configured to be allowed. However you get ICAP error after files are downloaded through the Web Security Service (WSS) because the files are sent over ICAP to be scanned.
Web Security Service
An error occurred while performing an ICAP operation: "File is password protected"
Tech support information: icap_error
Malware scanning often rejects password-protected archives, causing an ICAP error to occur during the attempt to download.
WSS allows exemption to specific file types from ICAP errors by allowing them to be sent to the client.
Steps to add Password Protected Archives to scanning exemptions.