Azure Rights Manager Service (RMS) is not working with Office 365 (O365) Integration when using the Web Security Service (WSS).
"Your machine isn't set up for Information Rights Management (IRM). To setup IRM, sign in to the Office, open an existing IRM protected message or document, or contact your help desk."
The Web Security Service (WSS) is performing SSL Interception on the application (even if the O365 Integration is enabled). This can be verified by checking if the cloud SSL Root Certificate CA is visible in the Event Viewer's logs for RMS.
Azure Rights Manager Service (RMS) and Office 365 (O365)
Add the following Domains/URLs to SSL Interception Exemptions:
Note: These Domains/URLs may change if Microsoft updates their service. It is recommended to verify at support.office.com what IPs and URLs are used by Azure Rights Manager Service.