Azure AD B2C Custom Policy ExternalUser is not found using ExternalAzureAD

Question

The custom policy authentication is integrated and works fine for the users, created specifically to the current tenant. However, in case, when user is logging in using AD account from a different tenant, it throws an error, saying that the account is not found.

I have verified, that the App Registration for the SPA has the following keys set:

{

"signInAudience": "AzureADandPersonalMicrosoftAccount",

"accessTokenAcceptedVersion": 2,

}

There is another tenant setup and configured by me, that works fine with external users (from other tenants). I can't find what is the difference. Please advice.