The application with identifier 'ProxyIdentityExperienceFrameworkAppId' was not found. AD B2C Custom Policy.

Azure AD B2C requires the registration of two applications for user sign-up and sign-in with local accounts: IdentityExperienceFramework (a web API) and ProxyIdentityExperienceFramework (a native app with delegated permission to the IdentityExperienceFramework). Users can sign up using an email address or username along with a password to access applications registered to your tenant, resulting in the creation of a "local account." These local accounts are exclusive to your Azure AD B2C tenant.

1. To resolved your issue first register the ProxyIdentityExperienceFramework application as  follow:
   1. https://learn.microsoft.com/en-us/azure/active-directory-b2c/tutorial-create-user-flows?pivots=b2c-custom-policy&tabs=app-reg-preview#register-the-proxyidentityexperienceframework-application
2. Replace Application (client) ID from above to the custom policy
   
   1. Add the application IDs to the extensions file TrustFrameworkExtensions.xml.
      
   2. Open LocalAccounts/TrustFrameworkExtensions.xml and find the element <TechnicalProfile Id="login-NonInteractive">.
   3. Replace both instances of ProxyIdentityExperienceFrameworkAppId with the application ID of the ProxyIdentityExperienceFramework application that you created earlier.
   4. Save the file.

References: https://learn.microsoft.com/en-us/azure/active-directory-b2c/tutorial-create-user-flows?pivots=b2c-custom-policy&tabs=app-reg-preview#register-identity-experience-framework-applications