Q:

Why does Outlook not block spam sent by employees?

Our organization uses Outlook as email service and hence have our organization email domain. If someone from the organization sends a spam or phishing email to someone else in our organization, its received by the recipient.
I tried sending a simple spam email (copied from personal Gmail account Spam folder) from my organization domain to someone in the organization, and it was received by the recipient.
In the Junk Folder in Outlook, there were few spam emails, which means that Outlook does filter spam emails. But still, it does not capture simple spam emails.
Why? Are there any policies of Outlook, that let someone in organization send anything to others in the organisation?

A:

Intra-domain emails (emails from your domain to someone else in your domain) have a much higher trust score, so they tend not to get blocked. This is done because legitimate employee-to-employee emails can look a lot like spam ("check out these pictures of my cat! [link]") . This is an ease of use issue. 
The sensitivity level of this can be changed on the server admin panel. But test it out to see if it impacts your normal flow of business. 
Exchange Online Spam filter policies

