If you are not comfortable with your fiancee and would not like to go ahead with the proposed marriage, you can call off the engagement and cancel the proposal of marriage by communicating to her parents about this decision citing the said reason.
Dont forget to mention that there was no dowry demand from your side nor they informed about giving any dowry, hence the reason for cancellation of this proposal is purely due to suspicious character of the would be bride.
This would provide you a platform to defend yourself in the event if they plan to lodge any criminal complaint against you all in retaliation.
You should send this communication by registered post with Acknowledgment card.
Dont worry about the repercussions, you can endorse a copy of this cancellation communication to the local police and also to the higher police officer of the city sent by registered post with AD, in order to keep them informed about the developments in this regard in the event of your fiancee's people approach police with false complaint agaisnt you people on the charges of dowry harassment etc.