Yes of course smacking your kids is wrong, and it really pisses me off when some people say 'I had a good hiding when I was a kid, and it did me no 'arm!' Many things were 'accepted' many decades ago that are not now, because we realise how wrong they are; be that comments about the colour of someone's skin, slapping yer woman, sexism, racism, raping your wife, or smacking your kids. (Or, as someone said upthread, slavery!) 
And 'there is nothing wrong with a gentle slap' is utter crap. You're still hitting them, so stop sugar-coating it. As has been said, it IS abuse, and people denying it are often justifying their own behaviour, and failings as a parent. (And you are failing as a parent if you have to resort to physical violence against a child to 'make them behave.')
@ilovetakeaways
Aside from all this, your sister needs help, as she is clearly struggling very badly with her children, and she needs help. For some reason, she isn't coping. Is there a dad on the scene? What part does he play? As some posters have said, your sister screaming at, and hitting her children is awful, and it IS abuse. It needs intervention, and soon!
And to the poster @Inliverpool1 who said people are being 'hysterical' by saying smacking a child is tantamount to abuse??? Well, words fail me. Please tell me you don't have children! No wonder society is so fucked up, with so many aggressive people, with attitudes like yours. 
A few other posters on here need to give their head a wobble too, if they think whacking a child for being 'naughty' is OK. I despair for humanity really do. It's 2019, and people still think this is OK? 
It's time it was outlawed, like in other countries.
@TooGoodToBeTrue
Actually, smacking is illegal in some countries and more are looking to make it so. Quite right too. It is completely unnecessary and also illogical. It is not legal to hit another adult (other than in self-defence) so why do we perpetuate this nonsense that it's acceptable to hit the physically weakest and most fragile?
Amen to that! Some people are happy to hit their own CHILDREN, when they are 'naughty,' but I bet they'd dial 999 immediately if any adult hit them, (even if it was their own partner.) How on earth can people think hitting a child is OK? I just can't get my head around it, or the type of person you must be to hit your own child! 
@Springwalk
Sit her down, tell her exactly what you have said to us, in the gentlest way possible explain you are worried the children be investigated if this were to carry on. You have to be prepared for her to take this very badly op, but you can not stand by as an adult, and as someone that cares for the children and let this continue. Are there other members of the family that could help you out with this conversation?
Agree with this too. ^ It needs intervention for sure. Before one of the children is badly hurt.