I'm gonna go against the grain here.
I don't see a problem. Everyone makes mistakes. He was probably just really horny and curious, and he got caught up in it.
A lot of dads are attracted to their daughters, they'll never admit it though. A couple here and there will do these kinds of things and once in a while get caught.
It's not the end of the world, he's not a predator, he was just curious. Nothing wrong with that. It doesn't take away from all those years of good parenting and being a good husband. Don't let a stupid one-off cloud your judgment.
I mean, he's only human. What if the daughter is a supermodel and everyone else thinks she's hot? The father can't magically be immune to that just because she's a daughter, it can be hard to control.
Nobody was harmed, nobody got hurt. It wasn't physical sexual contact or him saying dirty things to her. Trust me, it coulda been much much worse, but this is nothing. If there was physical contact or him saying dirty things to her, then you should be concerned, but otherwise, no. She's old enough too, it wasn't like she's a 5 year old girl.
Look at all the bright sides of optimism here, don't look at the one negative.
So, it's all good.
In several countries, age of consent and having sex at 13 is normal. Everyone views it fine. Mother nature even agrees (periods). You said she looks 18, so come on, give him a break.
Just ignore what happened, people are taking this way too seriously.
Edit:
Look, just tell the guy to confess to the girl. Then let the girl decide.
If the girl felt uncomfortable before, or reveals things that he did to her instead of this one-off incident, then re-evaluate the situation and lean towards something more drastic.