Sounds like your problem occurred when the dam was built.
It wasn't cored.
A dam sitting on top of natural ground will leak.
A properly constructed dam has topsoil pushed away, then subsoils excavated to least porous dirt, then the excavated site is refilled with compacted clay soils, effectively creating an underground water barrier, called a "core trench."
Get a copy of the Nov/Dec issue of Pond Boss and look at Mike Otto's story about compacting soils, and look at the photos as he built a dam on top of terrible soils, by creating a core trench and backfilling with clay.
Your dam is built like a sandwich, new dirt on top of old dirt.
Your dam needs a core.

Teach a man to grow fish...
He can teach to catch fish...