This is a complex problem. I agree with the previous post that I would focus on the older child not grabbing, but I can also see that you are, so I want to first suggest some strategies for him- you didn't state exactly what you do, but I have to tell you from five years of experience with three year olds in child care that time outs do not work for habitual offenses. If he is always taking things away you first have to look at why. The obvious answer is that he still may be a little resentful towards his younger sister. Make sure you are spending one on one time with him so he feels important. Secondly, make just a few of HIS toys (although I'm going to assume it is her toys he's snatching) totally off limits to her- not just things she can't have because she's too little, but things that are his favorites. Grown ups often try to force children to share, but think about your things. Would you share everything? Besides, sharing is difficult for even some three year olds to grasp. If he has a few things that he knows are "his" and that are "safe" from his little sister, he may be more likely to snatch. Thirdly, work on prevention. This requires a little more observation than most moms are able to give with all their other duties, but if you do it for a few days and really pay attention to the when, the how, the why, etc of his snatching things you may be able to step in before he grabs the toy. If you learn to read the signs and jump in before DO NOT scold him, he hasn't done anything yet. Very firmly (no please, no "okay?"- this is not a question) say "if you want sister's toy you need to ask her for it." or something like that. This does two things- it reminds him that you are watching, and it reminds him of the right thing to do. Lastly, if he does grab the toy, do not say no, do not put him in time out. Stand by him with a hand on his back or arm and firmly tell him to give the toy back to his sister, that we don't grab toys. Do this every single time and the problem will eventually stop, but you have to be vigilant, especially at first.
With your toddler- you have to be postive, simple, and firm. Avoid telling her "no." The same as the older child, you have to look at the what, why, etc. Obviously she is frustrated. If the older child takes the toy help her find the words before she has a chance to hit. Say "Sister doesn't like it when you take her toy." Then proceed to what I said to do with the older child. Hopefully if she sees you interveen on her side she will loose some of the frustration and not feel the need to hit. 95% of toddler frustration is based on their inability to express what they want or how they feel. Giving her the words or saying them for her will go a long way. Then, if she does hit, hold her hand (not if she tries to run away, obviously you never want to jerk on a toddler's hand) and say "ouch, hitting hurts- use your words with brother." I know I said not to say "no" to your toddler, but you can encourage her to say, even to yell "no" at her brother if it is a replacement for hitting.
Basic tips that will help with both kids:
-Never yell at them.
-Use positive language (tell them what TO do instead of what NOT to do)
-With any problem, think about whether there is a deeper issue.
-Make sure you have support.
Good luck!