Image copyright Dept of Justice Image caption The retailer spent about $1.6m on ancient artefacts for its Bible museum

A major US arts and crafts company has forfeited thousands of smuggled ancient artefacts from Iraq it had bought for a Bible museum.

Christian-owned firm Hobby Lobby has agreed to hand over the smuggled items and pay $3m (£2.3m) in a settlement.

US attorneys say it violated federal law by importing thousands of clay tablets and tokens as "tile samples".

Hobby Lobby said it "did not fully appreciate the complexities" of the import process when it began.

The retailer is well-known for being at the centre of a 2014 US Supreme Court battle to avoid paying for female workers' contraception on religious grounds.

Lawyers in New York said the company had imported "thousands of cuneiform tablets and clay bullae" - a way of recording information before the widespread use of paper.

The ancient artefacts were smuggled into the US through the United Arab Emirates (UAE) and Israel to Hobby Lobby's Oklahoma offices, with falsified shipping labels claiming the packages contained "ceramic tiles", and originated in Turkey and Israel.

"The company imprudently relied on dealers and shippers who, in hindsight, did not understand the correct way to document and ship these items," Hobby Lobby said.

But prosecutors said the company was warned by an expert that such items from Iraq were likely to have been looted from archaeological sites and needed to be carefully verified.

But the company purchased some 5,500 artefacts despite the warning, spending $1.6m.

"While some may put a price on these artefacts, the people of Iraq consider them priceless," the agent in charge of the customs investigation, Angel Melendez, said.

Image copyright Museum of the Bible Image caption The planned Bible museum, seen in an artist's rendering, is being built near the seat of the US government in Washington DC

Prosecutors said the purchase "was fraught with red flags", and the company never met the dealer, working with a middleman instead, and making the payments to seven private bank accounts.

The company's president, Steve Green, is also chairman of the planned museum, which is under construction in Washington DC, just a few blocks from the National Mall.

At 430,000 sq ft (40,000 sq m), it will be one of the largest museums in the city.

The museum's website says its collections will "convey the global impact and compelling history of the Bible in a unique and powerful way".

Image copyright Getty Images Image caption Mr Green is one of the driving figures behind the Bible museum

"Developing a collection of historically and religiously important books and artefacts about the Bible is consistent with the Company's mission and passion for the Bible," Hobby Lobby said in a statement.

"The Company was new to the world of acquiring these items, and did not fully appreciate the complexities of the acquisitions process. This resulted in some regrettable mistakes," it added.

Mr Green also said the company never purchased items directly from within Iraq, but has "learned a great deal" from the investigation.

"Our passion for the Bible continues, and we will do all that we can to support the efforts to conserve items that will help illuminate and enhance our understanding of this great book," he added.