Federal Law of 3 April 1995 "On the Organs of the Federal Security Service in the Russian Federation" changed the FSK into the Federal Security Service (FSB) and made the new service a much powerful organisation.
The law described the FSB role in the regions; clarified the FSB role in the Armed Forces; gave the FSB director ministerial status and the rank of army general; allowed it to conduct intelligence work and to protect Russian citizens and enterprises abroad; obliged the FSB to inform the president and the prime minister about national threats; gave the FSB powers of detention, and the right to enter any premises or property "if there is sufficient evidence to suppose that a crime is being been perpetrated there" without a warrant; permitted the FSB to set up special units, carrying firearms, and to train security personnel in private companies; and established the control structures over the FSB.
The FSB reforms were rounded out by Edict 633, signed by Yeltsin on 23 June 1995. The edict made the tasks of the FSB more specific, giving the FSB substantial rights to conduct cryptographic work, and described the powers of the FSB director. The number of deputy directors was increased to 8; 2 first deputies, 5 deputies responsible for departments and directorates and 1 deputy director heading the Moscow City and Moscow regional directorate. Yeltsin appointed Colonel-General Mikhail Ivanovich Barsukov as the new director of the FSB
The FSB played a major and ineffectual role in Chechnya but it also had to fight organised crime, terrorism, drug smuggling and corruption across the whole Federation as well.
On 20 June 1996, Yeltsin fired Barsukov and appointed Nikolay Dmitrevich Kovalev, to Acting Director and later to Director of the FSB.
In May 1997 the FSB was re-organized again following a curious political power struggle. The FSB structure was changed into five departments and six directorates:
- Counterintelligence Department
- Anti terrorist Department
- Analysis, Forecasts and Strategic Planning Department
- Personnel and Management Department
- Operational Support Department
- Directorate of Analysis and Suppression of the Activity of Criminal Organisations
- Investigation Directorate
- Operational-Search Directorate
- Operational-Technical Measures Directorate
- Internal Security Directorate
- Administration Directorate
- Scientific-Technical centre.
The FSB was not to recruit civilian personnel and the number of places offered by the FSB Academy was cut back.
In September 1998 the FSB staff had recieved only half of their salaries and distribution of meal allowances had stopped at the beginning of the year. The total number of FSB employees at the end of 1997 was 80,000.