Okay that was a bit of a lengthy explanation, but that pretty much sums up both why Lopu knew Mako's story and why Lopu wasn't worried about Mako betraying him. Luckily Cane is standing there for Lopu to refer to when discussing Mako's outfit. Aside from the clothes being worn out and ragged, the only difference in outfit was the bananna missing.
Not needing an Emblem for a power? What an odd thing to say, right?