Hi @Anonymous & @OliverRodrigues
Have tested the duplicate rules. Looks like it is working. Screenshot below for reference

@Anonymous Please note as @OliverRodrigues mentioned. Local Authentication is not supported. You may need to migrate it to Azure AD or Azure AD B2C.
Cheers
Hope it helps.
------------
If you like this post, give it a Thumbs up. Where it solved your request, Mark it as a Solution to enable other users to find it.