Files are encrypted on the client before they are sent (uploaded) to the server. When files are downloaded they are decrypted by the client. The encryption mode used is AES  in Counter Mode  with a 256-bit key. The encrypted key entered in the favorite settings is first decrypted with the selected RSA certificate and then used as the key for the symmetric AES encryption.
Manual Decryption / Encryption
Files can be manually encrypted or decrypted with the aesctr.exe command line tool that can be found in the application folder.
This features is available in the Professional Edition (or higher) of SmartFTP. Since the encryption is done on the client side it works with all protocols (FTP, SFTP, etc) and servers.
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