The target device is NTFS (this is not a FAT issue). Details of the reason for the error can be found at: https://docs.microsoft.com/en-us/windows/win32/fileio/naming-a-file
It's easy to work-around by prefixing the local directory with '\\?\' e.g. '\\?\E:\MyFolder'
The bug I would like to raise though is that this file was skipped by WinSCP but that didn't appear in the output logs anywhere as a failure, it was only by manually checking that I noticed files of these types were not being backed up.