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>The problem I have with this approach is that it introduces on-device scan for images.

Windows already does this via Windows Defender. This is a basic AV functionality and much more privacy preserving.

But Windows Defender doesn't report you to law enforcement when it believes it found a virus.

How do you know that? It is blackbox paradox, and all we have is what they say. They might report CSAM hashes to law enforcements. Any file can be a threat, hence images are included for scans. Defender also uploads whole files as unencrypted if you don’t opt-out.

Neither does this.

https://www.howtogeek.com/719825/how-to-stop-windows-10s-ant...

If Microsoft receives an illegal file through this channel, they are legally obligated to report it in the US.

...if a human actually gets the file, figures out what type it is, and examines it for themselves, they'd be obligated to report it. With the number of Win10 devices in the world, how big would their security team have to be to hand-groom every automatically submitted "suspicious" sample? (For that matter, why would a vanilla JPG get flagged as "suspicious" in the first place?)

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