A.B.
This is sticky because it's family. We had a similar situation with a friend. I tried talking to the mom, talking with the child, giving the child other outlets for her anger while I was watching her. My #1 priority is that my kids have to be able to rely on me to protect them. So I told both the girl and the mom that if there was violence during this visit I was very sad to say that she would not be able to come to our house the next week. And that I hoped she could follow our house rules because we really enjoyed her company. The relationship fizzled away for us after that, which wasn't the end of the world since obviously the kids were not compatible.
But in your case this is family so I would really brainstorm with your sister. Don't blame her parenting or the child - bring up the behavior only and that you can't allow your children to be at the receiving end of violence. They may not know what to do and are struggling here. Maybe bringing it up will help them realize they must find help in ending the behavior, the sooner the better.
Our rule, incidentally, (I have a 1-year-old who is now struggling with not being 'mean') is that if you do something that hurts another person then you are not allowed to be around people for a while; you are removed immediately. You have to play by social rules to be in social situations.