Colombia's Attorney General Guillermo Mendoza told reporters the government had confiscated $29 million and 17 million euros from fugitive drugs trafficker Daniel "El Loco" Barrera allegedly meant for laundering through the club.
"We are in no doubt that part of that money was aimed at financing the Independiente Santa Fe team," police chief Oscar Naranjo said.
It is the most recent case of the involvement of football clubs with the Colombian drugs cartels after America, Millonarios and Union Magdalena.
Ana Margarita Duran, head of the Anti-narcotics Unit, said: "This football team has received money from drugs traffickers through front men."
Santa Fe, six times Colombian champions, are top of the Clausura, the second championship of the 2010 season.
Club chairman Cesar Pastrana said they would cooperate in any investigation.
"Santa Fe has its doors open for anything they need... this issue has been ongoing for several months but so far we have not been asked for anything officially by the Attorney General."
Pastrana said the Attorney General's announcement, made on Tuesday had prevented Santa Fe from signing a contract with a firm intending to become sponsors of the club.
America has been owned since the 1980 by brothers Miguel and Gilberto Rodriguez Orejuela, chiefs of the Cali Cartel now serving jail sentences in the United States.
The club is on a U.S. government list of institutions others are prohibited from doing business with or risk economic sanctions.
