Password distribution is deactivated in Customizing (SCUM)

What causes this issue?

You can set the field attribute for "Initial Password" as follows
in transaction <ZH>SCUM</>:
GLOBAL
A password change is made in the central client.
The password change is distributed to the child systems.
DEFAULT
A password change is made in the central client.
The password change is <ZH>not</> distributed to the child systems.

The system issues an error message and will not allow you to continue with this transaction until the error is resolved.

Error message extract from SAP system. Copyright SAP SE.