When these formal efforts against FAPSI failed, the Presidential Security Service was said to have devised a plan to discredit "inconvenient" officials by collecting compromising materials on these leaders, including instituting criminal cases against them. No less than half a dozen high- ranking functionaries have been forced to leave FAPSI due to financial scandals. FAPSI Financial and Economic Administration Director Vladimir Malinin resigned in the beginning of 1994 when an audit revealed a huge shortfall in the FAPSI. Two of his subordinates were caught during the commission of a crime. Chief of the armaments department Aleksey Domrayev and chief of the military-medical service Anatoliy Klyuyev have also resigned. And the agency's Deputy General Director Aleksandr Orlov went on leave and did not come back [he is rumored to have fled the country]. In March 1994 Valeriy Monastyretskiy, then head of the Roskomtekh firm which sold KGB property, was appointed Malinin's replacement as chief of the FAPSI Financial and Economic Administration. From 1980 he had worked in the KGB's - later FAPSI's Government Communications Directorate, and he left government service in 1992 to found several companies such as Roskomtekh with FAPSI financial assistance. On 12 April 1996 he was arrested on charges of misappropriating property and abuse of position. The FSB has alledged that Monastyretskiy began working for the German BND intelligence service not long before his arrest. Monastyretskiy in turn charged that he was a victim of Korzhakov and Barsukov's criminal interests. He alleged that he had learned that Barsukov's Main Protection Administration [GUO] had purchased special eavesdropping equipment from companies connected with the CIA, to be installed in government offices. According to Monastyretskiy, when he attempted to prevent this pervasive surveillance of the Russian bureaucracy, he found himself targetted FSB military intelligence.

In the wake of the revelations about Monastyretskiy, compromising materials began appearing in the press challenging the rest of the Agency's leadership. A number of instances were documented in which senior FAPSI officials were living in extremely expensive apartments, or othewise engaged in financial irregularities. It was not by accident that the reporting focused on the extent to which FAPSI leaders obtained elite housing in the best areas of Moscow when regular FAPSI staff wait for years to obtain apartments. These scandals, or at least the publicity around it, seemed intended to discredit the FAPSI leadership in order to break up FAPSI and make it subordinate to the FSB on the eve of the presidential elections. Since FAPSI is intimately involved in surveillance and counter-surveillance activities, whoever controlled FAPSI possessed information, and thus could acquire power. The 1996 reorganization of GUO apparently resulted in returning the facilities of the Government Communications Administration to FAPSI control. These initially supported just over 300 subscribers, compared with over 2,000 currently.

Organisation

The 1993 Presidential Decree establishing FAPSI assigned four matters to FAPSI's jurisdiction: special communications (including government communications); cryptographic and engineering­technical security of encrypted communications; intelligence gathering activities in the sphere of special communications; provision of special information to higher bodies of authority.

Observers from other Russian special services believe that this variety of tasks has prevented the FAPSI from working effectively, and in any event the agency has been repeatedly subjected to efforts to reorganize or dismember it. Like the NSA, FAPSI is responsible for communications security and signals intelligence. Its responsibilities under the 1996 Law on Foreign Intelligence include collection of information pertaining to "political, economic, military, science and technology through use of electronic means." FAPSI has both the authority and capability to penetrate all government and private information services in Russia. It also has reportedly been successful in collecting intelligence on foreign business ventures, including confidential bank transactions. Unlike NSA FAPSI operates both overseas and domestically, and is authorized to engage in commercial operations, leasing radio frequency bands and government communications lines to both domestic and foreign companies. Russian law prohibits government employees to engage in commercial activities or to combine their main job with business undertakings, but FAPSI is somewhat exceptional in this regard. The Simaco and Roskomtekh companies, founded with FAPSI's direct participation, were headed by ValeriyMonastyretskiy, who was appointed chief of the FAPSI Financial and Economic Administration in March 1994.

FAPSI provides Russia with so-called "special information" which is obtained by electronic intelligence methods. According to FAPSI General Director Colonel General Aleksandr Starovoytov, this accounts for some 80 percent of the most valuable and objective information obtained worldwide. FAPSI operates a HF/satellite network, for both SIGINT purposes and transmission of government and intelligence traffic. FAPSI works closely together with the GRU, Russia's military intelligence organization, sharing SIGINT facilities around the world, including those located in embassies and consulates. In 1993 Russia and Vietnam signed a contract to ensure the continued use of the SIGINT facilities in Cam Ranh Bay. In 1994 the Russians came to an agreement with the Latvian government, which gives them the right to use the SIGINT station in Skrunda till 1998. Russia's largest SIGINT facility abroad is the one in Lourdes, Cuba. Most of the RTTY and numbers transmissions heard in North America originate from various transmitter sites in Cuba. FAPSI performs services that extend beyond those of its nearest American counterpart, the National Communications System, as FAPSI is responsible for maintaining both government and presidential information system and telecommunication lines. It controls Russia's physical communications systems, including government telephone lines, high-frequency communications, and cryptography services. FAPSI initially maintained communications lines for the Russian President and security services, though these responsibilities were subsequently re-assigned to GUO, and then re-assigned back to FAPSI. These include:

ATS-1 ("Kremlin") telephone communications for senior leaders in the offices of heads of Russian Federation ministries and department(first deputy ministers upward), and also some other organs of authority.

ATS-2 ("Hotline") is similar, and is used by deputy ministers, heads of departments and main administrations in important ministries and departments, and a number of other officials at similar levels of responsibility.

High Frequency -- intercity coded telephone communications are used mainly by regional leaders and for conversations with them.

Special switchboard includes telephone communications for the most senior leaders, including the president and his assistants, the prime minister and his deputies, and the heads of the power structures.

FAPSI developed the protected, Special­purpose Federal Information and Telecommunications System (SFITS or ITCS) for state administrative agency communications. SFITS/ITCS will link most federal agencies, and include technical and administrative documents, government directives and legal information from both the executive and legislative branches of government. The new digital telecommunications system is referred to at FAPSI as "Area 98" since all its numbers will begin with 98. The Russian Federation president's edict No. 334 of 3 April 1995 gave the development of ITCS the status of a presidential program. The new system is being funded with money from the Hermes German Government credit, using communications equipment manufactured by Siemens with Russian encryption equipment. The new system operates on optical-fibre cables, laid in existing tunnels, with one such cable replacing hundreds of heavily armoured communication cables. The system will not be confined to a narrow circle as were previous systems. Rather there are plans for large numbers of subscribers. Base stations of this system have already been installed in government house, the State Duma, the Federation Council, and the Presidential Staff building on Staraya Ploshchad. Most of the Russian regions will be connected to the system during the second phase of implementation.

The information component of SFITS/ITCS being developed is a system of situation centres: The highest element is the Russian Federation president's situation centre; next come departmental and regional information analysis centres and focal points in organizations and institutions, together with mobile multifunctional complexes for use in wartime and in emergency situations. The telecommunications component of the SFITS/ITCS is the Russian Integrated State System of Confidential Communications [RISSCC]. The Atlas protected data transmission network was developed as a matter of priority and is now functioning with the aim of forming the nucleus of the RISSCC. A transport component was developed during the deployment of the Atlas packet switching data network [PSDN], ensuring the transmission of documentary information between the administrative centres of the Russian Federation components. Terminals set up in the supreme state organs ensure the exchange of classified information, and the technical questions involved in ensuring the interaction of this network with other communications networks, including Infotel, Relcom, and Rosnet, were resolved. As with other Russian government agencies, FAPSI has been unable to ensure full state funding for its programs. The shortage of money has prevented FAPSI from fully capitalizing on its scientific and technical groundwork in the sphere of ensuring information security. This has particularly been the case with respect to the inadequate pace of progress of work on developing ITCS, producing promising prototypes of cryptographic equipment in the required amounts, and on completing the formation of Russian-made protected operating systems. FAPSI has urged a halt to funding the programs for developing ITCS carried out by other agncies and departments in parallel and without coordination with the program for designing and developing ITCS. The funds allocated to these programs exceed the resources required to fund the federal program for designing and developing ITCS. Defunding these other non-FAPSI efforts would make it possible to fully fund the FAPSI program for designing ITCS.

FAPSI is also developing an Internet service provider to serve the Russian organs of state power; it will ensure the operation of a segment of the network called RGIN (Russian Government Internet Network). The RGIN network is already an officially registered part of the Internet community of networks. Although it is not authorized to monitor domestic voice traffic, FAPSI has not abandoned the Russian traditions of government monitoring of communications. FAPSI is empowered to monitor and register all electronic financial and securities transactions and to monitor other electronic communications, including private Internet access. In 1995 the Russian Duma refused to approve a proposed law banning all encryption systems that were not approved by FAPSI. However, the provisions of the law were instead implemented by Presidential Decree No. 334, issued on 03 April 1995 [not as sometimes reported as July 1995]. The decree states that FAPSI's expanded role is aimed at "intensifying the struggle against organized crime."

The Decree tasked FAPSI with establishing a country-wide telecommunications system to register operations, including securities transactions, on the financial market. The decree required commercial banks compliance in their dealings with the Central Bank of Russia. FAPSI was authorized to monitor, register, and record all electronic financial transactions in the country, and to require banks and other financial institutions to pay for the service. The money FAPSI raised was to be divided between FAPSI and a special Fund of the President's Programs. FAPSI is a major investors in the Relkom Joint-Stock Company, which controls Russia's largest electronic mail network handling telecommunications projects for the Russian Central Bank, the Finance Ministry, and the Defence Ministry. This participation seems to consist both of an effort to ensure control over major forms of communications, along with some profit-seeking interest as well. The 1995 Decree restricts the use of encryption software to only those programs approved by FAPSI. For acompany in Russia to use encryption it must be pre-registered with FAPSI. To register with FAPSI, users are required to assess the degree of confidentiality needed. The decree provided no indication as to what methods of encryption (if any) are authorized by FAPSI, and users must consult the encryption providers who can only discuss encryption upon gaining clearance from the FAPSI registration authorities. The Decree also instructed the Russian Federation Customs Committee to ban the import of any "encryption facilities" which lack a FAPSI approved licence.

APSI's Main Government Communications Directorate, directed by Lieutenant General Andrey Ponomarev, maintains communications lines for the Russian President and security services, though these responsibilities were subsequently re-assigned to GUO.

FAPSI's Scientific-Technical Center software and hardware products for data protection include Verba [a cryptographic system to protect commercial information] an all-purpose protected subscribers' center; and identification support hardware.

FAPSI Atlas Scientific-technical Center is concerned with document managment, archives and related information systems.

Russian Academy of Cryptography is a sectoral academy, not a training but a scientific organization.

Financial-Economic Administration [FEU] includes the Economic Administration. Security Service ensures the security regime, the guarding of premises, and the protection of electronic intelligence. Security Service 4th Department is engaged in physical protection.

FAPSI subordinate organizations include NTT [science and technology center], TsITiS [Central Institute for Information and Communications], TsNKT [expansion unidentified], MO PNIEI [Design and Experimental Scientific Research Institute of the Ministry of Defense], and NPO Avtomatika.

FAPSI specialists are primarily trained at the Military Institute of Government Communications in Orel,and also at the Institute of Cryptography of Communications and Information Science of the FSB Academy. FAPSI also employs graduates of MGU [Moscow State University], MIFI [Moscow Institute of Physical Engineering], and Fiztekh [Institute of Physical Technology]. Tens of thousands of people are serving in the FAPSI, though according to plans by the year 2001 the number of the agencys military and civilian employees will be cut by 40 percent. The staff includes graduates from the Orel Military Institute of Government Communications and the Institute of Cryptographic Communications of the FSB [Federal Security Service] Information Academy, as well as mathematicians, physicists, and electronics specialists from Moscow State University, the Moscow Engineering and Physics Institute, and Bauman Technology and Economics Institute. Despite personnel reductions, FAPSI plans a significant budget increases, from 2.996 trillion Rubles in 1997 to 10-11 trillion Rubles in 1998-2001. These increases are needed to finance the replacement of all drafted military servicemen with professional soldiers. A major in the FAPSI earns the equivalent of what a colonel general from the Defense Ministry's central apparatus does with bonuses, this can total about 3 million rubles per month. On 01 August 1997 President Yeltsin signed a decree "significantly reducing" the personnel of troops subordinated to FAPSI, although no details about the decree were released. Troops subordinate to FAPSI had not been affected by previous presidential decrees ordering reductions in the armed forces.