According to the Certified Anti-Money Laundering Specialist (CAMS) study guide, 6th edition, page 105, the correct answer is C. It can be difficult to determine if there is negative media associated with counterparties solely from the customer's account activity and KYC file.
The study guide explains that negative media can include news articles, government sanctions lists, and other sources of public information that may indicate that a counterparty is involved in illicit activities. However, this information may not be readily available in a customer's account activity or KYC file, and may require additional research or investigation.

Reference: https://www.trulioo.com/blog/enhanced-due-diligence

The risk-based approach (RBA) is an essential foundation of the FATF Recommendations, as it allows countries, competent authorities and financial institutions to adopt a more flexible set of measures to target their resources more effectively and apply preventive measures that are commensurate to the nature of risks, in order to focus their efforts in the most effective way. The RBA is not optional, but a prerequisite for the effective implementation of the FATF Standards. The RBA requires the identification, assessment and understanding of the ML/TF risks to which the countries and FIs are exposed, and the implementation of AML
/CFT measures that are proportionate and tailored to those risks. The RBA is not a "zero failure" approach, but a way to mitigate the risks in the most efficient and effective manner.
References:
* FATF Recommendations, Introduction, page 11
* FATF Guidance on the Risk-Based Approach to Combating Money Laundering and Terrorist Financing
- High Level Principles and Procedures, page 3
* Risk-based Approach (RBA), What is the Risk-based Approach (RBA)?