Forum Discussion
SharePoint IRM & AIP; Differences and Configuration
There's nothing to configure on SPO side, it doesn't "interact" directly with AIP and only supports IRM/RMS, which is a big letdown and something we've been asking to be looked into for years now.
Anyway, if you want to protect documents with AIP, simply create/publish the labels then apply it via the client. There are some instructions here: https://docs.microsoft.com/en-us/office365/enterprise/protect-sharepoint-online-files-with-azure-information-protection
Do note the "important notes" section in this article, as there are severe implications of applying an AIP level to documents stored in SPO.
Oh, and E3 does not include AIP, just some components of it (basically what was previously known as Azure RMS). Here's a comparison page for the different plans: https://azure.microsoft.com/en-us/pricing/details/information-protection/
Thank you for the advice, appreciated as always :)