He can do what he wants to do on his property, so long as zoning laws allow it.
1) Tell him that you are concerned about the wall's location and that you hope he has a survey so that it is entirely on his property. Tell him that you will make him move or remove the wall if there's any encroachment. Follow this up in writing by letter, certified return receipt. If ends up building on your property give him 10 days to correct the problem, put it in writing as well, and tell him that you will seek to recover the costs of removal if he fails to remove the wall.
2) check with town officials regarding permit requirements. Where I live you need a permit to build a fence or a wall over a certain height or within a certain distance of the property line. Getting a permit requires submission of a plat with the location of the proposed fence/wall drawn in. Obviously one could lie, but it's a good check on this problem. (In addition, fences over a certain height built on the property line must have the neighbor's permission, with a signature on the permit application). Anyway, there are usually enforcement mechanisms for non-permitted work.
