i'm really sorry your in this rough situation, but if u believe this has gone past normal dicsipline than your obligation lyes with those boys or else u also are remembered by them as someone who didn't protect them and for the abused sometimes thats harder to forgive than the abuser. eventually they will learn that the abuser has serious issues but what was their aunts issues and what was their moms issues. if both u and the mom are afraid to speak up than just imagine how afraid those kids are. obviously its your choice and hopefully the answer is in your heart. i don't ever wish to be in those shoes. i hope u figure things out and i wish u the best of luck.
You could contact social services. You could video tape him or be a witness yourself. Do you feel these kids are in danger or that he is too rough. (I do not even spank my children as I don't believe in it, but many parents do. This sounds exteme, however.) The problem is that your sister is going along with it. Be prepared that they could both turn against you. I personally think that it adds insult to injury when the other parent turns a blind eye to things "to keep the peace". that is like being abused twice.
Have you ever discussed it with your sister? Are you present and do you say anything at the time? Do you believe these children are abused?
One thing that may or may not apply here is that beaters when confronted will then turn their anger from being confronted back on the abused. (This would apply to when you see a stranger in a parking lot hit at or be abusive to their child and you can't stand it so you say something----- often that person will leave the parking lot, go home and beat the **** out of the poor kid.)
I wish you more luck than you'll ever know as I can't imagine what it would be like to be a child who lives with a volatile person like this. Good luck and i'll be thinking of you and those boys.