Setup Launcher Unicode has stopped working

Recently we migrated one of our InstallScript MSI project to InstallShield 2013.
Everything went well, until our most recent build, which simply crashes mid-installation. The ‘Fault Module Name’ is ISSetup.dll, but that’s about all the comprehensive information I could get from the crash report.
After adding custom logging (essentially logging every line in our InstallScript code), the problem was found. It seems to be an InstallShield bug (confirmed also on InstallShield 2013 SP1).
Here is the code who caused the crash, and how I fixed it:

// This will cause a crash
FileCopy(szSourceDir ^ szFileName, szTargetDir);
// This will not cause a crash
FileCopy(szSourceDir ^ szFileName, szTargetDir ^ szFileName);