Firstly, I am so sorry for what you are going through, how devastating and shocking. As a social worker in the past I carried out assessments with non-offending carers like you.
The first thing to say is that this view you have that he is no risk to children now, is very naive, and dangerous. If social work were assessing you, they would be providing you with education around CSA, and looking to see if you could absorb the research and statistical evidence into your own assessment of risk. If you struggled to do this as you are now, there would be concerns about your ability to keep your children safe.
The fact is that your DH has historically abused a child. This is as clear and irrefutable evidence that he presents a risk of abusing children now. The level of risk is unknown but you categorically cannot say no risk. Many abusers begin to abuse in teenage years. Think about all the practical and mental hurdles he would have had to overcome in order to carry out the abuse. He would have known it was very wrong, and that it would hurt his sister. He would have known that he would get in trouble if discovered. He would have had to ensure a private time in which to take the opportunity to abuse. It is a calculated thing he did.
Like pps have said, there is no way he forgot this. EVEN IF that were true (which you should not believe for a second) that itself would be hugely concerning, that abusing his own sister meant so little it could be dismissed. Given he is lying to you about this now, it shows you his capacity for deceipt.
Unfortunately, child abusers are not the shady characters you may imagine. They are often charismatic and sociable, and the very people that most people would say ‘he would never do that’ about. Very capable liars. He has been caught and has admitted guilt to what he’s been caught for. Do not be naive enough to be so confident that there are not other parts of his story not known to you. If there has been no other abuse since then and he has truly changed, this is good, but you can never be truly confident of that. He can never be alone with children safely again.
The fact that they were close in age does not make this not abuse. In researching the topic, professionals do not use any particular measure of age gap but look more at the power dynamics at play, and your DH held all the power by virtue of age, cognitive capacity and his sex.
I understand that you don’t want to blow your world apart, but he has done that already. If I knew you I would be reporting you to SS as your children are 100% at risk, and the risk is vastly elevated by your unwillingness to see and accept that. I’m hoping that by posting this thread, there is a bit of you that knows that deep down, and that you are just speaking through shock.
Id be more than happy to answer any questions from my experience via DM if that would be helpful.