Panama was removed from the Financial Action Task Force on Money Laundering 's (FATF) gray list last February, but the Panama Papers scandal has led to scrutiny of the country.
The leaked financial report, which contains 11.5 million encrypted documents from Panamanian law firm Mossack Fonseca, exposes politicians and celebrities who own offshore shell companies and property. While many of the activity isn't illegal, some of the documents shed light on hidden businesses and wealth.
Still, the country has not broken any laws, according to Frank De Lima, a former Panamanian economy and finance minster. He told CNBC on Thursday that Panama has made great strides to rid of its bank secrecy reputation and has vigorously fought against money laundering, terrorism and tax evasion.
"The truth is that most of the corporations that were used by these high-profile clients weren't Panamanian," he said during an interview with "Power Lunch." "The money that these individuals or corporations are hiding is not in Panama, it's in other banking centers. "
A U.S. Treasury Department spokesperson said Wednesday that the agency aims to submit a long-delayed rule to the White House for review. The proposed regulation is said to force banks to uncover the names behind shell companies in efforts to address money laundering and other financial crimes. The initiative is a result of the Panama Papers scandal.
While De Lima believes that the label Panama Papers is a big blow to Panama, he contends that the firm is one in Panama and is not representative of the entire country. He suggested that the documents could be referenced as the "Mossack Fonseca's Papers" instead.
"We feel that it's completely unfair that they refer to this case as the Panama case," he said. "When you talk about tax evasion and money laundering it's a whole network and Panama is one piece of the puzzle in this case."
De Lima was a spokesperson for former Panamanian President Ricardo Martinelli in his 2009 election campaign. He also led the country's double taxation treaties negotiating team in 2009. The organization was formed as part of efforts to remove Panama from the Organization for Economic Cooperation and Development's gray list, which was achieved in 2011.
Critics argue that the Panamanian laws make financial crimes possible, but De Lima contends that the country has implemented changes to its former relaxed financial policies. De Lima said Panama is no tax haven, he said that the corporate tax rate is 15 percent and individual tax rate can be as high as 25 percent, depending on one's tax bracket.
"Our legislation meets international standards in regards to tax transparency," he said. "These documents date back 40 years also, so what happened before these laws were put in place it's hard to criticize."
Despite helping change Panama's financial policies, De Lima was detained for nine months in a probe of political graft allegations before being released on bail in February. He is disputing the charges.
— Reuters contributed to this report.