I've used the Peoplesoft delivered password encryption utility page before and below is the code that encrypts the password. I would imagine this would work in an application engine. They use java to do the trick.

PSGATEWAY_WRK.PT_IBGWENCPASSWD = "";

If None(PSGATEWAY_WRK.WRKPASSWORD) Then
   SetCursorPos(%Page, PSGATEWAY_WRK.WRKPASSWORD);
   Error MsgGet(158, 15136, "Message Not Found.");
Else
   If PSGATEWAY_WRK.WRKPASSWORD <> PSGATEWAY_WRK.IBPASSWORD Then
      SetCursorPos(%Page, PSGATEWAY_WRK.IBPASSWORD);
      Error MsgGet(158, 15133, "Message Not Found.");
   Else
      &pscipher = CreateJavaObject("com.peoplesoft.pt.integrationgateway.common.EncryptPassword");
      &str = &pscipher.encryptPassword(PSGATEWAY_WRK.WRKPASSWORD);
      &pscipher = Null;
      PSGATEWAY_WRK.PT_IBGWENCPASSWD = &str;
   End-If;
End-If;

did you try hash function?

Thank you for this pointer!

May help u.......................

DCP_PC_CEMS_DTL.DCP_CEMS_PASSWORD = Encrypt("", DCP_CEMS_WRK.DCP_CEMS_PASSWORD);