How is his hearing? Does he answer when his wife tells him something? A lot of men, my DH for one, don't, which makes it difficult when they later on claim that you didn't tell them something. I have no sure way of knowing whether DH heard what I said or not.
His hearing is OK, but like most married men, he does not always listen to his wife!
Not being a doctor, I do not know whether your brother-in-law is suffering from the onset of dementia or not, but I do understand why your sister is worried.
Perhaps she should try to find out whether he does actually hear what she says - if not a visit to the doctor is indicated on account of his hearing.
Is he forgetful of other things? If it is only conversations that they have that he forgets, it is highly exasperating, but probably not the health issue that forgetfulness in many areas could be.