It exists, (and you can even do it before they settle); but the AI will settle the site anyway even if it says it won't.
I keep seeing this over and over again and it's simply completely untrue.
When you demand something from AI, it weights its option. If they dislike you, they will always refuse. If they specialize in something and you want them to stop it, they will refuse. If they badly need something and you want to deny it to them, they will also refuse. These are straightforward situations.
More often than not AI civs agree to stop doing whatever they were doing that upset you.
They will stay true if:
1. That action was not vital to their interests;
2. They like you well enough;
3. They are not backstabby-pants.
(pure speculation: 4. You are intimidating enough.)
Many a time have I demanded from a tall-builder not to settle my lands and his settler pranced away. In most cases, these were Persians or the Hindu.
Keep in mind that religion is an exception here. Every convert is already a hostile action, so you know that they either like you but little, or they are planning to backstab you.
EDIT:
One more thing.
AI sees such demands as a grave insult. If they were neutral towards you or only somewhat friendly, in the long run, it can be a better idea just to kill the settler and let them forget about your little skirmish. Paradoxically, AI tends to be more willing to forgive a war than such demand.