Do not confuse the average "diplomat" with armed federal agents performing law enforcement functions at any given embassy.
If someone in any nation is doing something illegal that MIGHT involve stolen passports, a file is opened by the host nation and the country of interest.

As I'm not and never will be a fraudster, I won't do any research on this.
I hope the agents do a better job than a visa clerk who attempted to take my passport off me in Beijing before replacing it with a new one, that was to be posted to me at my address in China in another city. She didn't know that she had no right to expect me to be in limbo in a foreign land without my passport and its in-date valid visa. Pathetic!