@Godmaster - Thanks for the update.
When you apply a sensitive label to an email, it primarily encrypts the email content itself. The OTP (One-Time Password) you receive is for accessing the email content. When you apply a label to a OneDrive document, AIP encrypts the document content. This requires specific permissions or applications to open, which external users might not have by default.
Even though you're sharing a OneDrive link, the document itself is encrypted. External users need specific permissions (like being a guest user in your organization's tenant) to access encrypted content. OTP is primarily for email access. It's not designed for directly accessing encrypted documents shared via OneDrive links.
Add External Users as Guests - Add the external users as guest users in your Microsoft Entra tenant. This provides them with the necessary permissions to access encrypted documents shared within your organization.
Leverage Azure B2B Collaboration - If your organization uses Azure B2B collaboration, external users can use their existing work or school accounts to access the documents. However, they'll need compatible applications (like Microsoft Office or Adobe Acrobat with the AIP plugin) to open the encrypted files.
Review Label Permissions - Double-check the permissions and restrictions of the sensitive label applied to the document. Ensure it allows external users with the appropriate access level to open the encrypted content.
If you've tried the above solutions and are still facing issues, reach out to your IT administrator. They can investigate potential configuration problems within your organization's environment.
Hope this helps you find a suitable solution.