Yes, exactly.
You are using a diploma as an indicator of knowledge, and you have a diploma-giving machine (university) that gives the diploma to anyone that can pass a test. People cheat the test in order to get the diploma. It will always happen, no matter how intricate you make your tests, because you cannot automate knowledge verification.
It isn't a "problem" - it's an "impossibility". And it's one impossibility software companies have gradually started dealing with - most don't care about diplomas anymore, because the correlation between knowledge and having a diploma gets lesser and lesser the more diplomas are printed artificially.
So, that is a pretty good solution, too. Remove diplomas altogether, and let employers measure knowledge in a way they seem fit. They will have responsibility for the mistakes of an employee, so it makes sense that they make the criteria. That way, educational institutions will have to make their education useful in the real world, or their reputation will crumble.