For a football club mired in debt and with a long list of defeats, a duffel bag stuffed with $7m was a godsend. And that was just the petty cash.

Times had been tough for Bogota's Independiente Santa Fé football club. The last time it won a Colombian league title was in 1975, the club was racking up debts and often players were not paid on time.

Then, investigators say, the duffel bags full of cash started arriving in about 2002, and for a while fortunes of the club took a turn for the better.

Santa Fé lured Argentinian players to its ranks and by this year the team was savouring the possibility of a Colombian first division league title for the first time in 35 years.

But the source of the funds that transformed the club's fortunes was not a kindly benefactor. The cash is said to have come from Julio Alberto Lozano, an emerald czar turned drug lord, who bought shares in the club through friends and family. As he built up what police say is today Colombia's most powerful drug cartel, he used the Santa Fé football club as a front. American investigators say Lozano shipped as much as 960 tonnes of cocaine to the US and Europe over the past five years.

The organisation, called the El Dorado cartel, allegedly laundered part of its $1.5bn profits through the club.

Unfortunately for Colombian football the story of Santa Fé is not an isolated case. For years the sport has been tainted by its association with drug barons and criminals, and three more of the 18 first division clubs are under investigation for money laundering.

Ties between Colombia's powerful drug organisations and football have existed for more than three decades, since the heyday of the flashy cartels in the 1980s and early 90s when drug lords bought teams as their playthings. Pablo Escobar owned Atlético Nacional, Millionarios belonged to rival drug trafficker Gonzalo Rodríguez Gacha, and the Rodríguez Orejuela brothers, of the Cali cartel, owned shares in the América de Cali club. The capos pumped the teams with cash to buy top international players and boost salaries locally.

But the latest revelations of money laundering have finally forced the Colombian government to act. President Juan Manuel Santos, a lifelong fan of Santa Fé, has announced a "zero tolerance" policy for narco-football, which he denounced as "repugnant". In a recent speech he said he would put and end to the "macabre relationship between criminals and football".

The links between Santa Fé and the El Dorado cartel started to emerge last spring in reports from informants and undercover police agents.

In June prosecutors announced that a criminal investigation into several team owners was under way and one was arrested in Buenos Aires carrying a false Guatemalan passport. A witness told investigators he personally saw the cash-stuffed duffel bag taken to the offices of Santa Fé and handed over to its managers. In October police seized $103m and ¤17m in cash found in several vehicles parked throughout Bogotá. The cash, prosecutors said, was to be laundered through the Santa Fé club.

Days later the team's biggest corporate sponsor, Aguila beer, withdrew its funding.

Then it was revealed that the club's auditor, who was gunned down in July after being questioned by prosecutors, had also been auditor to former top paramilitary chief Salvatore Mancuso, and a partner of Escobar in the 1980s. Several news organisations reported in November that the cartel's top boss, Julio Alberto Lozano, turned himself in to US authorities in Miami in November, but Colombian investigators said nearly a month later they had not received confirmation he was in custody.

César Pastrana, the club's president, said the "doors were open" to investigators but stressed that "no one is guilty until proven otherwise".

The club has had a troubled past. One of its presidents was gunned down in Bogotá in 2002. Luis Eduardo Méndez, a criminal lawyer, took over in 2003 and led the club until 2007 when he was extradited to the US for obstruction of justice in a case where he acted as defence attorney to a drug trafficker.

The Colombian congress is one step away from approving a bill that would make financing of football clubs more transparent, creating incentives for football clubs to become private companies and imposing a requirement for each club to report transactions and player trades to a special unit of the finance ministry that investigates financial crime and money laundering.

"Either we change football or it will be over for us," Santos said. "I am not going to permit the demise of Colombian football."

"Football has a lot of windows though which illegal money can enter, and in fact it has," said attorney general Guillermo Mendoza. One way money is laundered through football is that a club buys a player for, say, $100,000 but puts it on the books as $1,000,000. It can also inflate salaries and ticket sales.

Jairo Clopatofsky, head of the Colombian government's sports agency, Coldeportes, said that makes Colombian football as it stands "non-viable".

The measures the government is seeking are a "lifeline" for Colombian football, he said.

But for Santa Fé the future remains uncertain. As the investigations began, the club's fortunes slumped.

"All this about mafia money in the club has to have affected the players; it's disheartening, and it has affected us fans," said Clímaco García, a shopkeeper dressed in a bright red jersey with his team's symbols, as he left the stadium after a recent Santa Fé match. "There had been rumours for years but we just didn't want to believe it."

The club's president resigned last month after another defeat, and Santa Fé is reportedly planning to sell off its three foreign players, including Argentinian star midfielder Omar Pérez. With neither big-name sponsors nor drug money to bail out their club, Santa Fe's disillusioned fan base must reconcile themselves to the reality that the club's chances of winning a Colombian league title seem more distant than ever.