If one of your Office 365 mailboxes has been configured with external forwarding you may encounter this error message when trying to send an email:
The reason may be due to the fact that starting September 2020 the default setting in Office 365 is to deny forwarding of emails to external mail addresses.
If you wish to allow users to configure external mail forwarding you need to configure this in Office 365 Security & Compliance by following these steps:
1. Go to Threat Management, select Policy and Anti-Spam
2. Expand Outbound Spam Filter Policy and click Edit Policy
3. Expand Automatic Forwarding and select On – Forwarding Is Enabled
Be aware that all users are now able to configure external forwarding which is a potential security threat. E.g. confidential emails can be automatically forwarded to insecure private emails using this feature.
Note that this setting does not affect forwarding to internal mailboxes, which is always allowed.