Here in the UK, diesel fuel for use in vehicles is taxed very heavily at around 49p per
litre, whereas diesel for agricultural and heating use is is only taxed at 3p per litre. Clearly, companies which use large
quantities of diesel (Hauliers and taxi firms, usually) would save a lot of money if they could obtain
their fuel at the cheaper rate. To prevent this, a dye is added to diesel for agricultural use to make it easy to detect. In the UK, a red dye is used and in the Republic of Ireland it's green. Basically, anything other than "diesel-coloured" is fine.
This dye is of course much easier to add than to remove, but with such a wide price difference between the two
variants, there is plenty of room for profit for those who can remove the dye and sell the fuel on.
"The dyed oil is treated by first adding acid to bleach out the colouring. It is then distilled to separate the fuel from the
acid-colouring residue. This process also removes the lubricant from the fuel so, at the end of the bleaching and distilling
process a new lubricant has to be added."
The scale of diesel washing operations vary, but a quick web search reveals that they typically operate from
farm buildings, which is presumably handy because a farm will be able to buy large amounts of red diesel without raising
suspicions. Apparently diesel washing is a favourite fundraiser for the Real IRA but I very much doubt, with profits so high,
that it's a "Terrorist only" activity.