This is a situation we resolved for a customer who was having issues when external people were trying to send to some of their distribution groups.
Delivery has failed to these recipients or distribution lists:
Your message wasn’t delivered because of security policies. Microsoft Exchange will not try to redeliver this message for you. Please provide the following diagnostic text to your system administrator.
#< #5.7.1 smtp;550 5.7.1 RESOLVER.RST.AuthRequired; authentication required> #SMTP#
Also, when you try to change the setting in Delivery Management you get this error in the Exchange admin center –
The action ‘Set-DistributionGroup’, ‘RequireSenderAuthenticationEnabled’, can’t be performed on the object ‘Asset’ because the object is being synchronized from your on-premises organization. This action should be performed on the object in your on-premises organization.
This customer previously had Exchange 2003 on premise.
Launch ADSI edit and find the distribution group in question.
Go to properties.
Find the attribute “msExchangeRequireAuthToSendTo” and set it to false.
Run a sync and you should be fine.