The answer would have to be yes, at the very least for the following reasons:
the money in the 529 belongs to you.
any taxpayer is allowed to make gifts of 15K or less to anyone else with no tax consequence, and no filing requirements
you and your sister just happened to give each other the same gift this year!
You re-assigning it to your niece is a no-brainer, and your sister can pay you back on no particular schedule, even in cash. There would be no records of any of it.