By Nicolás Misculin
BUENOS AIRES (Reuters) - A little over a year since Argentina's spy agency was shackled in the wake of the mysterious death of a star prosecutor, President Mauricio Macri is backing its quest for broader powers that critics fear will revive unfettered domestic spying.
Argentina's spies are pressing Macri to remove restrictions imposed by former president Cristina Fernandez after public investigator Alberto Nisman was found dead in his home in 2015, a source in the judiciary said.
Fernandez accused a rogue agent of playing a role in Nisman's murder, which came days after he accused her of covering up Iran's alleged role in the 1994 bombing of a Jewish center in Buenos Aires. Fernandez overhauled the country's spy agency in response, branding it the Federal Intelligence Service, or AFI.
But despite the new name, the agency is starting to look more like the former Intelligence Secretariat, with agents purged by Fernandez moving back into old posts since Macri took power in December, said an intelligence source who spoke on the condition of anonymity.
In May, Macri issued a decree that lifted controls Fernandez had placed on the spy agency's funding, allowing it once again to spend most of its budget without any oversight.
Macri's center-right government has since floated the possibility of giving back to AFI control of wiretaps that have been run by the judiciary since last year - raising red flags with Argentines fearful of a return to its sinister role in the country's past.
The old spy agency helped the military dictatorship of 1976-1983 target Marxists, labor unions and students in the country's "dirty war," when thousands disappeared. Successive democratically elected governments were widely believed to keep using it to snoop on opponents.
Macri, who has promised to uproot crime, declined to comment. But advocates of allowing the spy agency to conduct wiretaps again say it would help speed up criminal investigations amid a recent spate of kidnappings and extortion.
"I'm worried" about AFI regaining wiretapping powers, said Juan Rodriguez, the director of the court-controlled department DCC that now conducts all legal taps of some 3,000 phone lines in Argentina.
Wiretaps today are mostly used to track suspected drug traffickers, Rodriguez said, and must be authorized by a judge and registered for possible scrutiny.
Standing before DCC's 17 wiretapping devices, Rodriguez said "this is transparent ... we want to end the dark period that this system once represented."
A source close to Macri said it was a myth that the country's spies are sinister and powerful, and that AFI is too weak in its current state to operate effectively.
Ruling party lawmaker Emilio Monzo has said that Macri was studying the reform and would likely propose a bill by the end of the year if he deems it a good idea.
Monzo declined requests for an interview.
Macri has not said why he lifted oversight rules on AFI's budget, but a second intelligence source said the decision aimed to improve AFI's workflow by cutting out unnecessary bureaucracy.
But critics point to corruption cases in recent decades that have traced money used for bribes to the spy agency, which was assigned a $100 million budget for 2016.
The murder of Nisman has still not been solved.
(Writing by Mitra Taj; Editing by Christian Plumb and Matthew Lewis)