Mailer sending only to internal email addresses

Has any one encountered this issue?

We are 8.81 PL06, the mailer is correctly configured, but mail will only successfully send when it is being sent to an internal email address, otherwise the error 49 message is returned in the event viewer:

EmailMsg::Send::Failed to send the mail message error code: -49. Please make sure that all mail addresses are valid

The external email addresses are correct (mine for testing), so the mailer seems to be validating this address with internal ones?

Any suggestions?