External people can't open files with Sensitivity Label encryption.

Thanks Tony, so much to consider in this space and very helpful having people like you who kindly share their knowledge!

We've applied a label which controls access using the 'Any authenticated users' option to a document, attached that to an email, and sent to a number of external users. We've found that if they already exist as a Guest in our tenant (or their tenant is setup via B2B Direct Connect) they can open the document, but if they don't, they can't - they get the error that their account doesn't exist in our tenant. Same experience using labels where you pick users when assigning the label.

I think you're saying they shouldn't need to be a Guest or have B2B setup for this to all work, but it doesn't. Could this be that we haven't got something configured correctly somewhere else please?