Fraudulent activities in financial transactions continue to pose a significant challenge for the U.S. financial sector, driving the need for advanced detection mechanisms. Traditional fraud detection methods, which are often reactive and struggle to process large volumes of data in real-time, are increasingly being supplemented or replaced by AI-driven solutions. This paper examines the use of artificial intelligence in real-time fraud detection, focusing on its potential benefits, challenges, and future directions. AI-powered techniques, such as machine learning algorithms, deep learning models, and natural language processing, offer powerful tools for identifying and mitigating fraudulent activities. Both supervised and unsupervised learning, along with anomaly detection methods, enable the detection of unusual patterns and behaviors indicative of fraud. The integration of hybrid models further enhances the accuracy and reliability of these systems. However, implementing AI-based fraud detection systems presents challenges, including ensuring data quality, addressing privacy concerns, and ensuring scalability for real-time processing. Additionally, balancing model performance with regulatory compliance and ethical considerations remains a critical issue. Despite these obstacles, advancements in AI technology offer substantial opportunities. By improving data analytics, fostering collaboration between financial institutions and AI firms, and obtaining regulat...