What happens if you pose the mesh in blender and export only the mesh?
Also, I have literally rewritten half the FBX exporter. The issue is not on the blender end or the import to unreal end.
The armatures and meshes behave like expected (comparable to maya and 3dsmax, which is exactly as drawn.
The things that affect a character animation import are the retargeting and improper setup of bone rotations as well as bad export settings.
Maybe you could film your import/export process so we can review it and try to catch the issue.
Another thing you may want to check is that your shoulder bones aren’t rotating 360 deg around in this animation compared to where they are suppose to be.
reset the pose with alt g, alt s, alt r, and move the hands up again to see if you notice any changes.
Yuo could even just animate the arms going all the way up to spot when (at what rotation angle approximately) the issue starts to occurs.
Also, remember your kinetic chain. When you lift arms up the shoulder and clavicle adjust with it. If they don’t you end up stretching and deforming the mesh rather then having a natural look. This may be part of your proble too. (The adjustment on the clavicle is very slight usually, so maybe there’s even more to the issue).