It looks like the clay core is settling. To me that means not enough compaction of that area. Whether the lifts were too thick to properly compact, or there was too much or not enough moisture in it to properly compact it I don't know. If I am wrong, then I have no idea what is going on.
When we put our dam in over 20 years ago, my wife, me, and our evil spawn were walking down the new dam, and when we looked back, he was gone. He fell into a a Volkswagen sized hole on the top of the dam. The builder showed up the next day and tore out that whole section, layered and repacked it, and we haven't had a problem since.
