Hallucinations aren't mistakes, they're fabrications. The two are probably referred to by the same word in some languages.

Institutions can choose an arbitrary approach to mistakes; maybe they don't mind a lot of them because they want to take risks and be on the bleeding edge. But any flexible attitude towards fabrications is simply corruption. The connected in-crowd will get mercy and the outgroup will get the hammer. Anybody criticizing the differential treatment will be accused of supporting the outgroup fraudsters.

Fabrications carry intent to decieve. I don't think hallucinations necessarily do. If anything, they're a matter of negligence, not deception.

Think of it this way: if I wanted to commit pure academic fraud maliciously, I wouldn't make up a fake reference. Instead, I'd find an existing related paper and merely misrepresent it to support my own claims. That way, the deception is much harder to discover and I'd have plausible deniability -- "oh I just misunderstood what they were saying."

I think most academic fraud happens in the figures, not the citations. Researchers are more likely to to be successful at making up data points than making up references because it's impossible to know without the data files.