AWS Secrets Manager secrets are not encrypted at rest. This could impact the confidentiality of data or may expose secrets stored in secrets manager.
In AWS Console -
In Terraform -
References:
https://docs.aws.amazon.com/secretsmanager/latest/userguide/security-encryption.html
https://registry.terraform.io/providers/hashicorp/aws/latest/docs/resources/secretsmanager_secret#kms_key_id