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Control 1.23: Step-Up Authentication for AI Agent Operations

Control ID: 1.23 Pillar: Security Regulatory Reference: GLBA 501(b), FINRA 4511, SOX 302/404, NIST SP 800-63B Last UI Verified: January 2026 Governance Levels: Baseline / Recommended / Regulated Last Verified: 2026-02-03

Objective

Implement step-up authentication requirements when AI agents attempt sensitive operations such as financial transactions, data exports, or access to restricted information, requiring re-authentication at the moment of high-risk action.

Why This Matters for FSI

  • GLBA 501(b): Verifies user identity before sensitive data access
  • FINRA 4511: Supports authorized access to financial records at transaction time
  • SOX 302/404: Provides transaction-level authentication controls for internal control
  • NIST 800-63B: Implements AAL2/AAL3 authentication strength for sensitive operations

Control Description

This control establishes step-up authentication through:

  1. High-Risk Action Classification - Define actions requiring step-up (financial transactions, data export, external API calls, config changes)
  2. Authentication Contexts - Create Entra ID contexts (c1-c5) mapped to sensitive agent actions
  3. Conditional Access Policies - Configure CA policies requiring fresh authentication for each context
  4. Phishing-Resistant MFA - Mandate FIDO2/Windows Hello for critical operations
  5. Session Controls - Configure sign-in frequency (15 minutes for critical actions)
  6. Step-Up Monitoring - Alert on step-up failures and bypass attempts

Key Configuration Points

  • Create Authentication Contexts: c1 (Financial Transaction), c2 (Data Export), c3 (External API), c4 (Config Change), c5 (Sensitive Query)
  • Configure CA policies requiring phishing-resistant MFA for each context
  • Set sign-in frequency: 15 minutes for critical (c1), 30 minutes for high (c2-c4), 1 hour for medium (c5)
  • Require compliant device for step-up scenarios
  • Implement service principal compensating controls (approval workflow for sensitive SP operations)
  • Configure real-time alerting on step-up authentication failures
  • Start CA policies in report-only mode before enforcement

PIM Integration for Sensitive Agent Operations

Combine step-up authentication with PIM for administrative operations on AI agents:

Operation PIM Requirement Step-Up Context Combined Control
Agent Publishing (Zone 3) Activate Power Platform Admin c4 (Config Change) PIM + 30-min fresh auth
Connector Allowlist Changes Activate Power Platform Admin c4 (Config Change) PIM + 30-min fresh auth
Agent Deletion Activate Environment Admin c4 (Config Change) PIM + approval workflow
DSPM Policy Changes Activate Purview Admin c4 (Config Change) PIM + 15-min fresh auth
Agent Sponsor Assignment Activate AI Governance Lead c5 (Sensitive Query) PIM + justification required

PIM + Step-Up Workflow:

  1. User requests PIM activation for administrative role
  2. PIM approval workflow triggers (requires approver consent)
  3. Upon activation, step-up authentication context applied
  4. User completes phishing-resistant MFA
  5. Administrative operation permitted within activation window
  6. All actions logged with PIM activation context for audit

Zone-Specific Requirements

Zone Requirement Rationale
Zone 1 (Personal) Standard MFA; 8-hour session; step-up not required Low risk, minimal friction
Zone 2 (Team) Step-up for data exports and external API; 4-hour session; 30-minute fresh auth Team data requires additional verification
Zone 3 (Enterprise) Mandatory step-up all sensitive actions; 1-hour session; 15-minute fresh auth; phishing-resistant MFA; real-time monitoring Customer-facing requires strictest controls

Roles & Responsibilities

Role Responsibility
Entra Security Admin Configure authentication contexts and CA policies
Entra Global Admin Manage authentication strength and MFA methods
Power Platform Admin Implement connector-level step-up requirements
Compliance Officer Classify actions and validate regulatory alignment
Control Relationship
1.11 - Conditional Access Baseline CA policies; step-up builds on top (Conditional Access Automation)
1.18 - RBAC Entra Agent ID (Public Preview) enables Conditional Access for agent identities with agent-specific risk signals; role-based access complements step-up
1.4 - Advanced Connector Policies Connector governance enables action-level step-up
1.7 - Audit Logging Step-up events must be logged
2.22 - Inactivity Timeout Enforcement Complementary session controls — 1.23 governs authentication session lifecycle (CA policies via Graph API); 2.22 governs application-level inactivity timeout duration (BAP Admin API)

Automated Validation: Session Security Configurator

For automated deployment, validation, and drift detection of session security controls per governance zone, see the Session Security Configurator solution.

Capabilities:

  • Authentication context deployment (c1-c5) with conflict detection
  • Zone-specific CA policy deployment with 72-hour bake period enforcement
  • 5-dimension session security validation (session controls, auth strength, PIM, break-glass, conflict audit)
  • Daily drift detection with Teams adaptive card alerts
  • Compliance evidence export with SHA-256 integrity hashing

Deployable Solution: session-security-configurator provides PowerShell validation scripts, Dataverse infrastructure, and Power Automate flows.

Automated Compliance: Conditional Access Automation

For automated deployment and compliance scanning of Conditional Access policies supporting step-up authentication for AI agent operations, see the Conditional Access Automation solution.

Capabilities:

  • Automated deployment of authentication context CA policies for agent step-up auth (c1–c5)
  • Zone-specific policy templates enforcing phishing-resistant MFA for sensitive agent operations
  • Daily compliance scanning of CA policy configuration drift for step-up scenarios
  • Teams adaptive card alerts when step-up policies are weakened or disabled
  • SHA-256 evidence export with integrity hashing for FINRA/SEC examination support

Deployable Solution: conditional-access-automation provides PowerShell deployment scripts, Azure Automation runbook wrappers, and Power Automate flow definitions.

Implementation Playbooks

Step-by-Step Implementation

This control has detailed playbooks for implementation, automation, testing, and troubleshooting:

Verification Criteria

Confirm control effectiveness by verifying:

  1. Agent access without MFA is denied
  2. Sensitive action after >15 minutes triggers step-up authentication
  3. Step-up with FIDO2 key succeeds for critical action
  4. Step-up with SMS is denied when phishing-resistant required
  5. Step-up events appear in sign-in logs with authentication context

Additional Resources

Updated: January 2026 | Version: v1.2 | UI Verification Status: Current