It's a tricky situation. This was in the 70s and I had a friend in HS my parents didn't approve of and at first refused to let me associate with her and all it did was drive us together and into more mischief. Not as serious as OP's DD's friend, but our 'antics' had a real potential for disaster.
First off, I'd contact the school and have a frank talk with the appropriate person. I'm in the US so I don't know exactly who that is. I'd end it with asking that they keep a close eye on my DD's attendance and contact me if she's not in school. I say this because my friend & I started ditching and no one thought to call my parents.
I would forbid my DD from associating with the girl outside of school. Their past behaviour together is a good enough reason for that.
I would allow the girl in my home when a responsible adult is present The caveat would be no closed doors and I would NOT allow overnights (we snuck out). I'd also invite her on occasional family outings.
I would NOT allow my DD to go to the other girl's home. Her parents are either stupid, naive, or don't give a shit.
My parents were naive at first but finally figured things out. They at first refused to allow us to associate, but all it did was make us sneakier. Once they let us hang out at my house & invited her to family outings (she even went to the beach house with us) our need to 'rebel' sort of died away. I think most of her behaviour was 'attention driven' as her parents didn't really give 2 shits what she did until forced to by her behaviour. My parents intention wasn't to 'reform' her just to keep an eye on me, but once she started getting 'positive' attention she no longer needed the negative attention. She ended up closer to my parents than to her own.
Of course, the OP's DD's friend may not be 'reachable' and it's certainly not the OP's job. Her job is to protect her DD. If her friend changes as a part of it, so much the better.