* Rule of law in Malta in focus after killing of journalist
* EU lawmakers' resolution questions independence of police
* Malta says EU resolution is biased and inaccurate
EU lawmakers urged the European Commission on Wednesday to investigate Malta's adherence to the rule of law, in a move that could lead to sanctions following the murder of a campaigning journalist that has rocked the tiny Mediterranean island.
The European Parliament's non-binding resolution backed by an overwhelming majority of deputies but criticised by the Maltese government, also voiced "serious concerns" about police independence and international money-laundering on the island.
The move follows the murder on Oct. 16 of Daphne Caruana Galizia, a Maltese investigative journalist who had accused senior figures in both the government and opposition of corruption and involvement in international money-laundering.
Prime Minister Joseph Muscat, leader of the ruling Labour Party, denies the allegations of corruption and says everything will be done to find the journalist's killers.
The European Parliament "calls on the Commission to establish a dialogue with the Maltese Government regarding the functioning of the rule of law in Malta and to ensure respect for European values," the text of the resolution said.
This would be the first step in an oversight procedure that could trigger sanctions, including the suspension of Malta's voting rights in the EU, if systemic threats to the rule of law were confirmed and not addressed.
No EU member has been subject to these penalties, but Poland is currently under supervision over the independence of its judiciary, and lawmakers have also called for the activation of the procedure for Hungary.
The Commission, which monitors member states' application of EU rules, has so far avoided commenting on the state of the rule of law in Malta, the EU's smallest member state with a population of just 420,000 people.
The EU executive's vice president Frans Timmermans told deputies on Tuesday there were "no general concerns" at this stage on the application of anti-money laundering rules in Malta .
But in their text adopted on Wednesday the lawmakers cited several high-profile cases of alleged corruption and risks of money laundering involving government members, as well as the island's flourishing online gaming industry and a Maltese scheme to sell citizenship to wealthy individuals.
The Maltese government said in a statement the EU text contained "factual inaccuracies and partisan political bias".
"It is clear enough for the Maltese Government that most of this misinformation was led by highly politicised local actors, and can be read in a situation where some groups in the European Parliament are trying to gain leverage in negotiations on situations in their Member States," the Maltese government said.
In the resolution, backed by 466 lawmakers and opposed by 49 while 167 abstained, the deputies also accused Maltese police of failing to investigate "several serious allegations of corruption and breach of anti-money laundering and banking supervision obligations".
The text also regretted "that there has been no police investigation to date in Malta of the revelations regarding the Panama Papers", despite the appearance of 714 companies linked to Malta and high-ranking officials in the leaked documents about tax schemes in offshore jurisdictions.
Sources familiar with the work of Maltese authorities and a Reuters review of Maltese and EU data show possible shortcomings in Malta's efforts to prevent money laundering.
Muscat told Reuters last month Malta's financial services sector was "as transparent, solid and compliant as any other European jurisdiction".
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