Specifically do they, but not "Can they" only because I'm fully aware that they are, and always have been, capable of intruding on any/all personal/sensitive data that isn't encrypted on a local drive or removable hard drive. I'm fairly new to the encrypted data area, as well as storing data in the cloud. I'm just trying to understand this personal vault on OneDrive, better. If they find something that is against their policy, do they freeze your account permanently.. and what contact authorities? Say they found something regarding fraud for instance.. (just to understand the process better, purely for academic purposes, of course.) ..as, in this scenario, I am indeed discussing personal/family data, from a household of decent people trying to protect data such as social security, tax info, etc, commonplace files that would need privacy/protection from non-family members, outsiders, etc.
Yes, they do scan the content of files, but as an antivirus measure, according to their own website:
As a cloud storage service, OneDrive has many other security features. Those include: Virus scanning on download for known threats - The Windows Defender anti-malware engine scans documents at download time for content matching an AV signature (updated hourly).
As for scanning files to find misdeeds, we may never know because if they do, it is something they will not be willing to disclose to the public. But I highly doubt that Microsoft would actively snoop into your files simply because this is not the business model of the OneDrive service (they earn money by selling cloud space), and they may be breaking several privacy laws. Therefore they don't have any incentives to do that.