This error is caused by the SMTP User having an incorrect or blank password.
It is trying to send an email without authentication, therefore anonymously, and failing to do so.
Update the email login credentials to resolve the issue.
Login details are kept in the following:
Click System
Click Options
Click System Control Options
Click System Format
Click the Blue Arrow next to the System Email Defaults label
Click the Face icon at the top left to open the SMTP Users window
Enter correct credentials in here
Save your changes