There is speculation the jihadi in the 10-minute recording could be Siddhartha Dhar from London, but Theresa May said she could not comment as it was an ongoing police investigation.
Shadow home secretary Andy Burnham asked why Dhar was able to travel to Syria in 2014 despite being on police bail for alleged terror offences.
Mr Burnham said: "Something clearly has gone seriously wrong. People will rightly want to know how on earth this could have possibly have happened and reassurance that steps are in hand to prevent a repeat."
He added: "Whether he (Dhar) is the person in the video doesn't matter. The system has failed because it allowed him to abscond to Syria.
"He was well-known to the authorities having been arrested six times on terror-related offences before being placed on bail in 2014."
Mrs May claimed Labour had supported the use of more police bail for terror suspects while legislation was going through parliament, adding the Government had also introduced more checks at ports for people leaving.
She also stressed the Government is working to remove extremist videos from the internet and that about 1,000 pieces of unlawful terror-related content are being secured for removal every week.
In September 2014, Dhar and eight other men were arrested in raids on suspicion of encouraging terrorism.
His arrest was part of an investigation into the banned extremist group al Muhajiroun. But within a day of being released on police bail, he disappeared.
He had been asked to surrender his passport under strict conditions designed to prevent him from promoting extremism.
Instead, prosecutors say he took a coach to Paris with his wife and young children and headed for Syria.
He was soon boasting on social media of having reached territory controlled by IS.
Dhar, 32, was born a Hindu, but converted to Islam around a decade ago, taking the name Abu Rumaysah.
While facial recognition experts and his own sister have expressed their doubts, speculation persists that the man seen berating David Cameron and shooting a prisoner in the video is Dhar.
He lived in Walthamstow, east London, and reportedly ran a business renting out bouncy castles
before converting and becoming radicalised.
Dhar tweeted after fleeing to Syria: "What a shoddy security system Britain must have to allow me to breeze through Europe to the Islamic State."
He even posted a picture of himself posing with his newborn child in one arm, holding an assault rifle in the other.
Security services are still working to identify the militant, who threatens the UK and calls Mr Cameron an "imbecile", in the 10-minute recording.
Authorities will have plenty of audio and visual material of Dhar to compare to the masked killer; he has appeared in numerous media interviews and even has his own YouTube channel.
In an interview with US programme 60 Minutes in 2014, he said he did not love his mother and other members of his family who had not converted to Islam.
Sky News Home Affairs Correspondent Mark White describes Dhar as a "shameless self-publicist" and said there were clear similarities between him and the man who appears in the Islamic State video.
"There are very strong similarities in his voice. There are also similarities in the facial features that we can see, which are the areas around the eyes."
Two facial recognition experts have told Sky News they believe the masked killer is not Dhar.
His sister, Konika Dhar, also told Sky News she does not think it is him in the video.
Five men wearing orange jumpsuits are shot dead by in the IS video, which has not been independently verified.
It also features a young boy who has been identified as the son of Grace "Khadija" Dare, a Muslim-convert extremist from Lewisham in southeast London.
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