3.5 D&D You As Character RPG Questions & Discussions The Engineer says...
I'm sure there won't be any repercussions to lying to the guard captain about this. Once she'd heard enough to have suspicions, I'd have advised to lay out the situation from the start and asking for her assistance in making sure it both is a non issue and stays that way.
That said, prior to that I would have advised not making a fuss about it at all, and asking in some appropriate way about the social habits of elves, including physical contact between friends and acquaintances. There are a lot of societies on earth who would be shocked at your interpretation of the gesture.
But, I wasn't there, so I just get to hope my advice would've been wrong anyways I guess. :P.