Encrypt Only Issues with Microsoft Office attachments in Hybrid

Hello,

We have a customer that is currently in a hybrid scenario and are almost ready to fully transition over to Microsoft 365 Exchange Online and are having an issue with sending message with the Encrypt Only permission. The issue started with users in two separate Microsoft 365 tenants but owned by the same entity when sending messages internal or to the other owned tenant using the Encrypt Only and have Office document attachments. Recipients are having trouble opening the attached Office documents as IRM is preventing them with the message "You do not have credentials that allow you to open this document."

They using the latest version of Microsoft 365 Apps for business or enterprise. Users are properly signed in with the Work account in the Office applications. To try and remedy the issue we turned the DecryptAttachmentForEncryptOnly attribute in the IRMConfigration in both tenants.  IRM still seems to be applying to the attachments in the messages. Users are still having issues and not only with the desktop app, but also the Outlook Online.

Since both tenants are in a hybrid state, is it possible that the hybrid state is causing issues with the users' Outlook clients properly connecting to the IRM service?  Encrypted messages without attachments are not an issue.  Only when Office documents are attached.

Thoughts, ideas...?

Thanks in advance!