This is almost exactly what I said when I was asked to install end-to-end protection software into my laptop as a freelancer. I stood my ground and they understood. They initially said they would send me another laptop to work from, but eventually relented on the requirements altogether and just limited my access to customer data.
If the project is already in AWS then it has to be downloaded outside the network at least once. I think s3 is one of the cheapest methods to server files on aws. There is no benefit to a secondary service.