Yes the front square mortice locks the drawer shelves in place because they are not all the way to the back. Given that the dadoes and joints are just knock together, no glue on them, there is no dimensional stability for the case width. This is mostly needed to fit the drawer fronts accurately. Hence the groove near the front.
So the purpose of the groove is to allow the pegs to be driven in to straighten the side of the case and adding dimensional stability so the drawers can be fitted properly. They are then cut off. They may be glued in.
You can do a lot with very little! You can do a little more with a lot!