Indeed: The appropriate course of action is to first contact the player and ask him to either delete and recreate his account, or request a name change.
If that fails, then in the general case, there's little you can do. However, there are two more specific cases where you can.
The first is if you are on Dwilight. In that situation, you can file an SMA Report with the Titans, who can take it from there, and if he still doesn't comply, they can force-deport him.
The second is if the name is truly an obviously offensive one (and I personally believe this falls into that category). In that case, you can simply report him to the Titans or Magistrates for violations of the Social Contract.