Castaño and his brothers Fidel and Vicente founded the ACCU (and its previous incarnations) after their father was kidnapped and killed by the Revolutionary Armed Forces of Colombia (FARC), in association with other enemies or victims of the guerrillas.
Castaño received combat training from his brother, from army officers and members of the paramilitary group as well as from the Israeli mercenary Yair Klein.
Of this training came out the order for the extermination against the UP between the 1985-96 The Castaño's paramilitary groups were financed by drug kingpin José Gonzalo Rodriguez Gacha.
AUC was disbanded after then Colombian President Alvaro Uribe Vélez reached a peace agreement with reduced terms for its members.
Castaño announced that he would give himself up for trial in the United States and would accept his participation in numerous crimes, though he resented his being personally linked to the drug trade.
Castaño had become isolated from the organisation according to some observers, as he seemed to become relatively critical of the AUC's increasing association with narcotraffickers in recent years and was more willing to compromise with the Colombian Government.
Acting AUC commanders claimed initially that there was an accidental exchange of gunfire between his bodyguards and a separate group of paramilitary fighters.
Other sources within the group and among its dissident factions claimed that he and his men were captured and tortured before being killed and then buried by order of other AUC top leaders (perhaps his own brother Vicente Castaño and Diego Murillo AKA "Don Berna"), who had become increasingly close to narcotraffickers and their trade.
One of the rumours, dating from June 1, 2004, stated that unidentified diplomatic sources told the AFP agency that Castaño may have been spirited away to either Syria or Egypt, via Panama, allegedly with U.S. assistance.