By accident a friend of mine and I met IG earlier. He's on my IFF list as a friend and I use my own IFF list and not the factions. On the scanner though he was listed as neutral (purple image). Shouldn't he be listed as a friend?
Sword of Krath - Aristocra - Aliit'buir - Friend
Grev'endar'togl be Ar'Klim
Who owns the ship your mate was on? IFF works on the basis of who owns the entity, it has no idea of the pilot or commander except in a limited sense when you or your faction have some link to the entity.
IFF only works with electronic sensors (ie: those in ships, vehicles, etc) and on the owners of entities, not on organic entities (PCs, NPCs, Creatures). The only exception to this is PCs and NPCs within the same faction, they'll display as friends. In future it'll likely be possible to use items to gain the benefits of electronic scanners when out and about on foot.
See Section 1.3 and onwards for more information: http://rules.swcombine.com/general/scanning/