This looks like a PAM configuration bug.
When pam_unix fails, the error is (willingly) ignored.
One temporary solution to fix this could be to change the line:
password [success=1 default=ignore] pam_unix.so obscure sha512
to
password required pam_unix.so obscure sha512
** Changed in: pam (Ubuntu)
Sourcepackagename: shadow => pam
--
passwd - passwords do not match but updated successfully
https://bugs.launchpad.net/bugs/272232
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